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Making Tax Digital: What It Means for You and Your Business

 

Making Tax Digital (MTD) is transforming how individuals and businesses interact with HMRC. If you're a business owner, landlord, or self-employed professional, understanding MTD is essential for staying compliant and avoiding penalties.

In this blog post, we break down what MTD is, who it affects, and how you can get ready—with expert support from Balancewise Services Ltd.

 

What Is Making Tax Digital?

Making Tax Digital is a UK government initiative aimed at modernising the tax system by requiring digital recordkeeping and online tax submissions. It’s designed to make tax administration:

More efficient

More accurate

Easier for taxpayers to manage

It replaces paper-based or manual submissions with a digital-first process, using compatible accounting software to send tax data directly to HMRC.

Who Does It Affect?

MTD is being introduced in phases, and different rules apply depending on your business type and turnover.

MTD for VAT (Now Mandatory)

If you're VAT-registered and your taxable turnover is above the £85,000 threshold, MTD rules already apply to you. Since April 2022, all VAT-registered businesses—regardless of turnover—must:

Keep digital records

Submit VAT returns via MTD-compatible software

MTD for Income Tax Self Assessment (MTD ITSA)

Coming into effect in April 2026 for:

Self-employed individuals

Landlords with gross income over £50,000
(Threshold drops to £30,000 in April 2027)

These individuals will need to:

Keep digital records of income and expenses

Submit quarterly updates to HMRC

File a final end-of-year declaration digitally

MTD for Corporation Tax

Still in consultation—expected rollout not before 2026.

What You Need to Do

To comply with MTD, you’ll need to:

1. Use MTD-Compatible Software

Switch from spreadsheets or manual books to approved software like:

QuickBooks

Xero

Sage

FreeAgent
(We can help you choose and set up the right tool!)

2. Maintain Digital Records

This means storing transaction-level data (e.g. sales, purchases, expenses) electronically—linked directly to your MTD software.

3. Submit Returns Electronically

Returns must be submitted through your software, using HMRC’s MTD API. You can no longer log into your HMRC account to type them manually.

How Balancewise Services Can Help

At Balancewise Services Ltd., we make MTD compliance simple. Whether you're already VAT-registered or preparing for MTD ITSA, our team will:

Set up and manage your MTD-compatible software

Ensure your digital records are accurate and up to date

Handle your VAT or income tax submissions seamlessly

Provide training and ongoing support where needed

We do the tech—and the tax—so you don’t have to worry.

Don’t Wait—Get Ready Today

MTD is here to stay, and preparation is key. Even if you're not yet mandated, switching to digital accounting now will save you time, reduce errors, and keep you ahead of future changes.