Making Tax Digital (MTD) is one of the biggest changes to UK tax administration — and many business owners are still unsure what it means for them. As a Xero partner accountancy firm, we’re here to explain clearly what’s changing, who will be affected, how to prepare, and how we can handle the transition for you.
What is Making Tax Digital?
Making Tax Digital (MTD) is a government initiative that requires taxpayers to keep digital records and submit tax information through approved software rather than paper forms or basic spreadsheets.
What does it mean when tax goes digital?
It means:
- No more paper returns
- No more manual HMRC entries
- Tax updating quarterly instead of annually
- Digital record-keeping using compatible software
What are the drawbacks of Making Tax Digital?
- Additional admin for small landlords & sole traders
- Possible software cost
- Learning curve for digital systems
- More frequent reporting
Who will be affected by Making Tax Digital?
Primarily:
- Self-employed individuals
- Landlords
- VAT-registered businesses
- Eventually, other taxpayers
How much does Making Tax Digital cost?
Costs may include:
- Software subscription (e.g., Xero)
- Time to comply
- Accountant support if required
Is Making Tax Digital going to happen?
Yes — MTD is very much moving ahead in phases.
Will Making Tax Digital be delayed?
Parts of MTD were previously delayed, but the implementation for Income Tax from April 2026 is currently confirmed.
Is Making Tax Digital mandatory?
Yes — for those who fall within the income thresholds once phased in.
How will the UK tax changes in 2025/2026 affect me?
From April 2026:
- If you are self-employed or a landlord with income over £50,000 — you MUST join MTD ITSA.
From April 2027:
- £30,000+ income threshold applies.
How can I be exempt from Making Tax Digital?
You may be exempt if you:
- Have religious grounds
- Are unable to use digital tools due to age or disability
- Live in an area without digital access
- Can demonstrate genuine practical difficulty
How do I set up Making Tax Digital?
How to set up MTD?
You must:
- Use MTD-compatible software
- Sign up for MTD with HMRC
- Keep digital records
Do I need to register for MTD?
Yes — unless your accountant does it for you.
(
And yes — we can handle this process for you.)
Can I use a spreadsheet for Making Tax Digital?
Not directly.
But you can use a digital spreadsheet
only if:
- It links to bridging software
- Automatically transfers data to HMRC
What software can I use for Making Tax Digital?
As a
Xero Partner, we recommend
Xero for:
- MTD VAT
- MTD ITSA preparation
- Digital record-keeping
- Automated bank feeds
We can onboard and train you as part of our service.
Can my accountant do MTD for me?
Absolutely — and many of our clients prefer this.
We submit the returns, keep digital compliance, and ensure accuracy.
What records do I need for MTD?
You must digitally store:
- Income
- Expenses
- VAT (if applicable)
- Supporting documents
Is Making Tax Digital free?
How much does Making Tax Digital cost?
MTD itself is free — but software usually isn’t.
Typical SME software ranges from £10–£40/month depending on features.
Do I have to use Making Tax Digital?
Yes — if you meet the criteria.
Opting out is only permitted if HMRC grants exemption.
Is mytaxdigital free?
Some tools advertise free features, but functionality may be limited, and many are not fully compliant.
Who is exempt from Making Tax Digital?
You may be exempt if:
- You cannot use digital tools due to disability
- You are elderly or have limited digital capability
- Digital service is unavailable in your location
- HMRC approves a written appeal
Is there any free software for Making Tax Digital?
Currently:
- There may be limited options
- But most businesses will use paid software like Xero
- And free versions often lack key compliance features
What is the point of Making Tax Digital?
MTD aims to:
- Reduce errors
- Increase efficiency
- Improve accuracy and transparency
- Provide up-to-date tax reporting
- Reduce unpaid tax and discrepancies
Need help ith Making Tax Digital?
If this all feels overwhelming, you’re not alone. We assist with:
- MTD setup & registration
- Xero software onboarding
- Quarterly submissions
- Digital record-keeping
- Ongoing support
We ensure your tax is submitted correctly, on time, every time — with zero stress.
