Making Tax Digital (MTD) is an initiative by HMRC that is designed to simplify and modernise the UK tax system. Set to be fully implemented in phases - from 2026 for Income Tax Self Assessment (ITSA) for businesses and landlords with more than £50,000 in income followed by those with income over £30,000 from April 2027.

These requirements apply to around 1.75 million customers, following this engagement, the government will keep under review the decision on further mandation of businesses and landlords with income below £30,000. - MTD aims to make tax administration more efficient and accurate through digital record-keeping and real-time reporting.

Any changes to the way that taxes are administered and reported are likely to cause concern for business owners who may feel that they don’t have the time to get to grips with the new system. In this article, we’ll explain how HMRC hopes MTD will benefit businesses and how an outsourced accountant can help you to manage the changes.

Why Is HMRC Making Tax Digital?

So, is Making Tax Digital just another plate to spin or does it offer tangible benefits for businesses?

Reducing Errors

One of the main aims of MTD is to reduce errors in tax reporting. By digitising the tax process, individuals and businesses can ensure their tax submissions are accurate and up-to-date. Traditional paper-based systems are prone to human error, which can result in incorrect tax calculations and delayed processing. MTD uses software that automatically updates and cross-references information, thereby minimising mistakes and streamlining the tax submission process.

Enhanced Efficiency

MTD is designed to help businesses to obtain a clearer understanding of their financial status. By using digital tools to manage their taxes, businesses can access their financial data in real-time. Enhanced visibility allows for more efficient financial planning and management: rather than spending valuable time on manual bookkeeping, business owners can focus on strategic growth and day-to-day operations. The automation of routine tasks also means that businesses can more effectively allocate resources.

Driving Business Improvement

Real-time financial information provided by MTD will allow businesses to continuously monitor their performance, which is crucial for making informed business decisions and ensuring effective budgeting for tax liabilities. With accurate and up-to-date financial data, businesses can more precisely track income, expenses, and profits. As well as supporting improved financial management, this also helps managers to identify potential areas for cost savings and growth.

Improving Accessibility

MTD also promises the potential to significantly reduce paperwork, businesses can manage their taxes online, with instant access from any location and at any time. Enhanced flexibility is especially useful for business owners who are constantly on the move or work from disparate locations. With digital records, there is no need to keep track of physical documents, so it is easier to stay organised and efficient. Additionally, digital records mean that valuable office space will no longer be required to store vast quantities of paper, while your business’s critical tax data will be safe from disasters and theft.

How We Can Help

To comply with MTD, businesses need to use approved digital tools, but it isn’t necessary to invest in HMRC software for Making Tax Digital. At David Howard, we can manage these digital tools on your behalf, ensuring that your business remains compliant with MTD requirements. Tax laws and reporting regulations frequently change, so it can be challenging for business owners to stay up to date. By working with our expert accountants, you can be confident that all changes are managed effectively, and your business complies with the latest tax rules.

For those landlords and sole traders not currently working with an accountant, it represents an opportunity to be advised quickly and at a low cost by an accountant who can help you minimise tax bills by giving the best advice on what costs can be claimed, as well as advice on the best structure to minimise tax. Many sole traders can benefit by trading as a Limited Company, for example, and the same applies to Landlords for whom interest relief can be restricted when rental income is personal rather than when properties are company-owned. Working with an accountant gives you an opportunity, whatever your profile, to discuss matters which will help you maximise your returns and make the best decisions for your future throughout your life.

Get in touch for more information. 

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