Making Tax Digital – Are You Ready?

Making Tax Digital: Key Deadlines and Rollout Dates Every UK Business Needs to Know

The UK government is transforming the tax system to make it more effective, efficient, and easier for taxpayers to get their tax right. At the heart of this transformation is Making Tax Digital (MTD).

If you’re a sole trader, small business owner, or landlord, it’s crucial to understand how and when MTD will affect you.

In this article, we’ll walk you through what Making Tax Digital is, who it applies to, and most importantly, the key deadlines and rollout dates you need to prepare for.

What Is Making Tax Digital?

Making Tax Digital is the government’s initiative implement a fully digital tax system in the UK. It requires taxpayers to keep digital records and submit their tax information to HMRC electronically using approved software.

The main goals of MTD are:

To reduce the risk of errors
To simplify the submission process
To bring the tax system into the digital age

MTD will eventually apply to most businesses and individuals who pay tax in the UK, but the rollout is happening in stages.

Making Tax Digital for VAT: Already in Effect

Since April 2019, MTD has applied to VAT-registered businesses with a taxable turnover above the VAT threshold (currently £90,000).

From April 2022, MTD for VAT was extended to all VAT-registered businesses, regardless of turnover.

Key requirements:

Keep VAT records digitally
Submit VAT returns using MTD-compatible software

Even if your business is voluntarily registered for VAT, you are now required to follow MTD rules.

Making Tax Digital for Self Assessment - Coming Soon

This is where sole traders and landlords really need to pay attention.

The government had planned to launch Making Tax Digital for Income Tax Self Assessment in April 2024, but it has since been postponed to give individuals and software providers more time to prepare.

Here are the revised deadlines:

April 2026 – MTD for Income Tax Self Assessment becomes mandatory for self-employed individuals and landlords with a total gross income of over £50,000 per year.

April 2027 – MTD for Income Tax Self Assessment will then extend to individuals with an annual income of over £30,000.

Future rollout dates for those under £30,000 are still under review. However the government has set out plans to introduce legislation to lower the qualifying income threshold from April 2028 – Source Xero

Key Requirements Under Making Tax Digital for Income Tax Self Assessment (ITSA)

If you’re within the income thresholds by the relevant deadline, you’ll be required to:

Keep digital records of income and expenses
Use Making Tax Digital compliant software like Xero
Submit quarterly updates to HMRC
Submit a final end-of-year statement

Quarterly Updates Explained

Quarterly updates are a new requirement under Making Tax Digital. Instead of submitting one annual return, you’ll need to send a summary of income and expenses to HMRC every three months.

These updates are not tax returns and don’t require tax to be paid each quarter, but they do give HMRC a more real-time view of your income.

Your MTD-compliant software will help compile and submit this information.

Final Declaration

Once the tax year ends, you will still need to finalise your income figures. The final declaration confirms that the quarterly reports are accurate and complete, and allows for any necessary adjustments.

This is essentially the replacement for the traditional Self Assessment.

How to Prepare for Making Tax Digital

With deadlines now confirmed for sole traders and landlords, it’s important to begin preparing well ahead of time:

1: Check Your Income Level

If your total business and/or property income is over £50,000, you’ll be affected by April 2026.

2: Switch to Digital Record Keeping

Start using MTD-compliant accounting software. Popular options include Xero, QuickBooks, and FreeAgent.

3: Get Familiar With Quarterly Reporting

Even though it’s not yet mandatory, get used to recording and reviewing your income and expenses every quarter.

4: Speak to Your Accountant

They can guide you through the transition and help you stay compliant.

5: Stay Updated Rules and dates can change.

Non Compliance

Failure to comply with Making Tax Digital requirements may result in penalties. HMRC has stated that there will be a period of ‘light-touch’ enforcement during the initial stages, but persistent non-compliance will eventually lead to fines.

What About Those Under £30,000?

If your income is under £30,000, you are not yet required to comply with Making Tax Digital, but that doesn’t mean you won’t be included in the future. HMRC has indicated that the system may eventually be extended further.

Voluntary compliance is also encouraged, as it can streamline your tax affairs and reduce the risk of errors.

Final Thoughts

Making Tax Digital represents a major shift in how businesses and individuals manage their taxes. By digitalising records and submitting more frequently, HMRC aims to reduce errors and improve transparency.

The best thing you can do? Start preparing now.

Whether you’re just over the threshold or expecting to be soon, adopting digital tools and habits early will save you stress in the long run.

If you’re unsure whether MTD applies to you, or if you’re ready to start preparing but need help choosing software or setting up your digital records, speak to a professional accountant who can guide you through the process.

Smart Accountants are MTD ready so if you need help getting MTD-ready, Contact us today to book a free consultation.

To learn more about Making Tax Digital visit HMRC’s website HERE