WHAT IS MAKING TAX DIGITAL (MTD)?

ASESA Solutions Ltd- WHAT IS MAKING TAX DIGITAL (MTD)?

Making Tax Digital (MTD) is a key initiative from HM Revenue & Customs (HMRC) designed to modernise the UK tax system by making it digital, efficient, and accurate. The aim of MTD is to improve record-keeping, reduce errors, and give businesses and taxpayers a clearer, up-to-date view of their tax position.

Under MTD, taxpayers use digital software to keep records and send tax information to HMRC. The first and most established application of MTD is for Value Added Tax (VAT) — where all VAT-registered businesses already submit VAT returns digitally using MTD-compatible software. This move away from manual or paper-based systems ensures better accuracy and aligns submissions with digital accounting systems.

HMRC is now expanding MTD to Income Tax, most notably for self-employed individuals and landlords. From 6 April 2026, those whose annual income from self-employment or property is more than £50,000 will need to start using MTD for Income Tax. This means keeping digital records and providing quarterly updates to HMRC through software that is compatible with MTD requirements.

Why the change?

MTD aims to reduce the burden of year-end tax chaos and help taxpayers stay on top of their obligations throughout the year. Rather than filing a single return after the tax year ends, taxpayers will provide regular updates that give a real-time picture of income and expenses. This supports better planning and reduces the risk of last-minute errors or missed deadlines.

In upcoming newsletters, we’ll dive deeper into how MTD works for VAT and income tax, who needs to sign up, and how to prepare — all using official HMRC guidance.