Is Your Business Ready for Making Tax Digital?

Services

April 24, 2025

HMRC’s Making Tax Digital (MTD) initiative is transforming how individuals and businesses in the UK manage and report their taxes. If you missed our recent seminar or want a refresher, here’s a summary of the key points to keep you compliant and ahead of the curve.

What is Making Tax Digital?

Making Tax Digital is a government-led initiative aimed at modernising the UK tax system. It requires taxpayers to use digital tools and approved software to maintain records and submit tax returns. The goal? To reduce errors, increase accuracy, and streamline tax administration for everyone involved.

Key Features of MTD

Digital Tax Accounts – Every taxpayer will have a personal online tax account, allowing easier tracking and communication with HMRC.

Quarterly Reporting – Businesses will replace the traditional annual return with quarterly submissions, starting with VAT and moving to Income Tax.

Approved Software Required – Submissions must be made through HMRC-recognised accounting software—no more spreadsheets or paper records.

Digital Record-Keeping – All financial information must be stored digitally, enabling more accurate and real-time reporting.

Who Will Be Affected?

1. VAT-Registered Businesses
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- – If your turnover exceeds £85,000, MTD for VAT has already been compulsory since April 2019.
- 2. Self-Employed & Small Businesses
– From April 2026, MTD for Income Tax Self-Assessment (ITSA) applies to individuals earning over £50,000.
– From April 2027: The Threshold reduces to £30,000.
– From April 2028, MTD applies to those earning over £20,000, including sole traders and landlords. This start date has been brought forward from the originally proposed 2029/2030.
3. Corporation Tax
- – MTD for Corporation Tax is not yet live, but plans are in motion. We’ll keep you posted as HMRC releases further details.

Are There Any Exemptions?

Yes, some groups are exempt, including:

Individuals with Power of Attorney

Non-UK residents

Certain vulnerable individuals (e.g., ministers of religion, Lloyd’s underwriters)

Additionally, taxpayers earning under £20,000 will not be required to comply until at least 2027, and those with residence or remittance-based income will see a delayed rollout.

Spring Statement Updates – Key Changes to Note

Software Submissions:
Quarterly updates must be submitted using MTD-compliant software, including Self-Assessment returns from April 2026.

Accounting Period Flexibility:
Businesses with a 31 March year-end will benefit from simplified transition rules beginning April 2026.

Penalty Reform:
HMRC is stepping up enforcement with increased penalties for late VAT and ITSA payments. However, they retain discretion to cancel or reset penalties under certain circumstances.

Why This Matters to Your Business

Compliance Confidence – Avoid penalties and stay in HMRC’s good books.

Faster Filing – Say goodbye to last-minute tax return stress.

Real-Time Insight – Know your liabilities as they arise.

Improved Accuracy – Fewer errors, less hassle.

What Should You Do Now?

Check Your Status – Do you fall within the upcoming MTD thresholds?

Get the Right Software – We can help you choose an MTD-compliant system.

Go Digital – Begin migrating your record-keeping now.

Stay Informed – Key dates are approaching fast. Let’s make sure you’re prepared.

How can we help?

Navigating the transition to Making Tax Digital doesn’t have to be overwhelming. At Dux Advisory, our team of experts is on hand to guide you through software selection, digital record-keeping, and all compliance requirements.

Contact us today to ensure your business is ready for the future of tax.