Making Tax Digital

What is MTD?

Making Tax Digital (MTD) is a government initiative introduced by HMRC to modernise the UK tax system. It requires businesses and individuals to keep digital records and submit their income records to HMRC on a quarterly basis.

The aim is to make tax administration more effective, reduce errors, and ensure that taxpayers are keeping accurate, up-to-date financial records throughout the year. This means that HMRC have more of an insight into your income.

Who does MTD affect and when will it be introduced?

Making Tax Digital for Income Tax Self Assessment will be introduced in phases by HM Revenue & Customs and will affect self-employed individuals and landlords based on their total income from self-employment and/or property.

• April 2026 — Over £50,000 in sales/turnover

• April 2027 — Over £30,000 in sales/turnover

• April 2028 — Over £20,000 in sales/turnover

Important: These thresholds refer to sales or turnover, not profit. This means the total income you receive before expenses are deducted is used to determine whether MTD applies.

Will I pay more tax?

No—MTD does not mean you will pay more tax!

It simply changes how and when your financial information is reported to HMRC. You are submitting more frequent updates, but the amount of tax you pay is still based on your actual profits, just as it is now.

What to do if MTD affects you

If you fall within the MTD thresholds, there are a few key steps to take:

Start keeping digital records
Spreadsheets may no longer be sufficient unless they are linked to compatible software.

Choose the right software
We recommend using FreeAgent, which is fully MTD-compliant and designed for small/medium businesses, landlords, and freelancers.

Consider a free banking option
You can get Mettle, a free business account, which includes access to FreeAgent at no cost: www.freeagent.com/mettle

Get support early
Switching to MTD is much easier if you prepare in advance rather than waiting until the deadline.

Advantages of Cloud Bookkeeping Software

Ease of Access
Cloud bookkeeping is online, allowing you to access your business records from anywhere in the world at any time—no downloads or installations required.

Real-Time Financial Information
You get up-to-date financial data instantly. This means you can track profits, expenses, and cash flow without waiting for your accountant to file tax returns.

Backup and Data Security
Automatic online backups are included, so your data is secure without any extra cost or effort on your part.

No Physical Records
All sales, expenses, and receipts can be uploaded and stored digitally, eliminating the need for paper files.

Multi-User Access
Collaboration is easy. Your accountant or team members can access the records online, removing the need for physical document transfers.

Automatic Updates
The software is always current with the latest version. Updates are free and applied automatically, so you never have to manually upgrade.

MTD Compliant Software

In order to provide information in a digital format to HMRC, we suggest that you switch over your business records to one of the online software packages below.