Making Tax Digital - Explained
Everything you need to know about Making Tax Digital.
What even is Making Tax Digital?
This article will break down Making Tax Digital for Income Tax Self Assessment (MTD ITSA) in a way that won't make your head spin. Let's make this tax talk less scary and more straightforward to understand.
What's the deal with Making Tax Digital?
Aside from being a mouthful for most people, MTD is the new way tax reporting will happen. HMRC is going digital, meaning that everything will now be online. This means all self-employed people, including landlords, must keep digital income and expense records. They must also submit quarterly updates to HMRC using MTD software.
We are saying goodbye to paper records and hello to digital efficiency, plus quarterly updates instead of one big annual headache.
Who needs to pay attention to Making Tax Digital?
If you are:
- Self-employed
- A landlord
- Earning over £50000 annually (starting from April 2026)
- Earning between £30000 and £50000 (beginning in April 2027)
Currently it is undecided what will happen with earnings under £30,000, but we will let you know as soon as we do. Subscribe to our news to be the first in the know.
What records do I need to keep to be ready for MTD?
You will need to keep track of your income (every penny), expenses (Yes, even the coffee for client meetings), and bank transactions related to your business. You need digital records of this in an MTD-Compatiable software that can be submitted to HMRC for quarterly updates.
How Many Reports Do I Need To Submit?
If you are wondering how often you need to report under the new MTD ITSA rules, then make sure you put these on your calendar. Here is your new routine for reporting.
You now need to submit six reports:
- 4 Quarterly updates - with your income and expenses throughout the year.
- 1 End of Period Statements (EOPS) - this must be submitted at the end of the tax year to confirm your figures.
- 1 A Final Declaration - that declares all of your income and confirms any tax liabilities.
What Software is MTD-Compatible?
There are some great digital options out there for you to help make this journey smoother. We love to use Xero, but you can also use MTD-compatible software like QuickBooks, Sage or FreeAgent.
Do I Have to Comply With Making Tax Digital?
Let's be honest - HMRC doesn't love surprises. Missing your submissions could mean penalties or fines for non-compliance or late submissions. Nobody wants that stress!
The Big Question: Do I Still Need to File A Traditional Tax Return?
Nope! MTD ITSA (Making Tax Digital Income Tax Self Assessment, in case you forgot) is replacing the old school Self Assessment. Your digital software will be your new best friend when submitting your quarterly updates and the EOPS and Final Declaration at year-end.
How Can We Help?
Feeling overwhelmed? Don't worry. We're your MTD ITS experts, and we can help you with personalised advice, software setup, training, or ongoing support.
We know this might sound like a lot to take on, and there will be learning curves if you do this all for yourself in your business, but you don't have to struggle with this. Get in touch with us! We can help you manage your new reporting rhythm and keep you on track with tax.
Your MTD ITSA Action Plan:
- Check your income bracket
- Pick your digital software
- Get your records organized
- Give us a shout for help!