MTD stands for Making Tax Digital. This is a UK government initiative which requires businesses to keep digital records and submit their tax returns to HMRC using MTD-compatible software.
Businesses will need to use digital software to record all their financial transactions, including sales and expenses, and to maintain digital records that are accurate, complete, and up-to-date. This push the need for regular and accurate bookkeeping. Businesses need to ensure that their bookkeeping software is MTD-compatible and that they are keeping records in a way that meets the MTD requirements.
The rollout for MTD began in April 2019 with the introduction of MTD for VAT. This first phase and it applies to all VAT-registered businesses with a taxable turnover above the VAT threshold of £85,000. These businesses are required to keep digital records and submit their VAT returns using MTD-compatible software.
The next phase of the rollout is the introduction of MTD for Income Tax, which is currently scheduled to come into effect from April 2026, when self-employed individuals and landlords with annual business or property income above £50,000 will be required to use MTD-compatible software to keep digital records and submit their Income Tax updates to HMRC on a quarterly basis. The government has also announced its intention to extend MTD to Corporation Tax in the future.
MTD is a significant change for businesses and individuals, as it requires them to adopt new digital technologies and processes for tax compliance. However, it is also designed to streamline tax reporting and make it easier for businesses and individuals to keep accurate records and comply with their tax obligations. Getting online bookkeeping services would ensure you keep your digital records updated and ready for filing. Explore our features at Vookeeper to see how professional bookkeeping can make you ready for MTD.
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