Making Tax Digital is a government scheme to overhaul the UK tax system by replacing paper returns with digital reporting. The aim is to decrease errors and help taxpayers fulfil their responsibilities more efficiently. MTD requires individuals and businesses to maintain digital records and use HMRC-approved software to file tax returns.
Current progress
MTD for VAT has already been launched. The next stage is MTD for Income Tax Self-Assessment. From April 2026, landlords and sole traders earning over £50,000 must comply. The threshold reduces to £30,000 in April 2027, and £20,000 in April 2028. Limited companies and partnerships will be brought into the scheme at a later date. Here, you can read more about Making Tax Digital.
What it means for taxpayers
When MTD for ITSA comes into force, taxpayers will need to submit quarterly digital updates instead of annual paper-based self-assessments. An End of Period Statement and Final Declaration will also be required. Although this introduces more frequent reporting, it should provide greater clarity over liabilities and make financial planning more straightforward.
Preparing for the change
Getting ready early is crucial. Using MTD-compatible software now ensures compliance and helps streamline processes. HMRC continues to refine the scheme, including pilots that allow taxpayers to familiarise themselves with the system before it becomes compulsory. Many small businesses find it helpful to work with professional Cheltenham accountants, like www.randall-payne.co.uk/services/accountancy/cheltenham-accountants/, to ensure they remain fully compliant.
MTD represents a long-term shift in tax administration. With deadlines approaching, reviewing income, adopting software, and seeking advice will help taxpayers transition smoothly to the digital system.