Making Tax Digital is a government initiative designed to move close to three million small businesses onto a new digital tax system. This modernised, 21st-century approach gives companies a streamlined way to manage their tax records and affairs, while also making it easier for HMRC to access information quickly and accurately.
The changes apply to a wide range of taxpayers, including landlords, businesses, self-employed individuals, and personal taxpayers.
Making Tax Digital is currently required for VAT-registered businesses with a taxable turnover above the £85,000 VAT threshold. From April 2026, businesses and landlords earning £50,000 or more will also need to register for Making Tax Digital for Income Tax. To ensure a smooth transition, it's strongly advisable to start preparing well ahead of the deadline.
What Should Your Business Consider Before The Transition?
1. When Is The Making Tax Digital Deadline?
Making Tax Digital for Business (MTDfB) began on 1 April 2019. Any VAT-registered business with a turnover exceeding £85,000 is required to keep digital records and submit VAT returns using HMRC-compatible software.
2. Do Your Research
The scale of these changes means many UK businesses will need additional IT support and careful planning. Regularly checking HMRC's latest news and guidance is the best way to stay informed and avoid any last-minute complications.
3. Are You Using The Right Software?
Making Tax Digital allows businesses to file VAT returns digitally and maintain a full digital record of their financial information. If you currently use separate software for storing VAT data and filing returns, you'll need to ensure these are digitally linked before you make the switch.
4. What Are The Benefits Of Making Tax Digital?
The initiative is designed to make paying taxes simpler and more efficient, while helping businesses keep on top of their day-to-day accounts. The key benefits include:
Accuracy — Digital record-keeping significantly reduces the risk of errors and miscalculations compared to manual methods.
Efficiency — An automated system means businesses, accountants, and HMRC can all work faster, saving valuable time across the board.
Easier Record-Keeping — The right software, integrated with the digital tax system, makes recording and filing online returns far more straightforward.
Tax submissions can be one of the most stressful times of year for business owners. Making Tax Digital aims to change that removing the need for manual records and marking the end of paper-based accounting in the UK for good.
