Making Tax Digital has been announced, delayed, rescoped and re-announced enough times that a lot of business owners have stopped paying attention. That is understandable, but the direction has never changed: digital records, kept in software, submitted more often than once a year.
VAT: already here
All VAT-registered businesses must keep digital records and file VAT returns using compatible software. Two parts of this are still widely misunderstood.
- The digital record requirement is about how you keep the records, not just how you file. A shoebox reconciled once a quarter into software is not compliant.
- Digital links matter. Where data moves between systems — a spreadsheet into filing software, for instance — it must move by a digital link, not by retyping.
Income tax: coming in stages
MTD for Income Tax Self Assessment extends the same idea to the self-employed and to landlords, above set income levels, phased in by turnover over several years. Those in scope keep digital records and send quarterly updates to HMRC, followed by a final declaration after the tax year ends.
What to do now
If you are already on cloud accounting software and reconciling regularly, you are substantially ready and the change will feel procedural. If you are still working from a spreadsheet or a folder of receipts, the work is not the filing — it is the year or two of habit change that has to happen first.
Moving early is materially easier than moving under a deadline. It also tends to pay for itself before the deadline arrives, because businesses that reconcile monthly make better decisions than businesses that find out how the year went in the following January.
This article is general information, not advice. Tax treatment depends on your individual circumstances and the rules change. Please take advice specific to your situation before acting on anything here.