How to Stay Compliant with HMRC’s Making Tax Digital (MTD) Requirements

Making Tax Digital (MTD) is one of the biggest changes to the UK tax system in recent years. Its goal? To make tax administration more effective, efficient, and easier for taxpayers through the use of digital tools. But for many self-employed individuals and small businesses, understanding what’s required—and staying compliant—can feel like a minefield.

In this guide, we break down exactly what MTD is, who it affects, and how you can stay on the right side of HMRC’s digital expectations.

What is Making Tax Digital (MTD)?

MTD is an HMRC initiative that requires individuals and businesses to:

• Maintain digital records of income and expenses.
• Submit tax returns digitally using MTD-compatible software.
• Send quarterly updates (for Income Tax) instead of filing one annual tax return.

The goal is to reduce human error, improve record-keeping, and ensure more accurate tax reporting.

Who Does MTD Apply To?

✅ MTD for VAT (Already in Effect)

All VAT-registered businesses must follow MTD rules, regardless of turnover. That means:

• Keeping digital records of VAT transactions.
• Using MTD-compatible software to submit VAT returns.

✅ MTD for Income Tax (Coming Soon)

Set to roll out from April 2026, MTD for Income Tax applies to:

• Sole traders and landlords
• With total business or property income over £50,000

Those earning between £30,000–£50,000 will follow from April 2027.

How to Stay Compliant

Here are five simple steps to ensure you’re ready for MTD and stay compliant going forward:

1. Use MTD-Compatible Software

HMRC requires you to use approved software that can:

• Keep digital records
• Submit returns directly to HMRC
• Track your income, expenses, and VAT in real-time

Popular MTD-Compatible Software Includes:

• QuickBooks
• Xero
• FreeAgent
• Sage
• Zoho Books

If you’re unsure what to choose, we at Equitax can help you pick the right platform for your business.

2. Digitise Your Record-Keeping

Gone are the days of spreadsheets and paper invoices. Under MTD, you’ll need to:

• Store all invoices, receipts, and bank statements digitally
• Record every transaction clearly and consistently

Cloud-based accounting software can automate much of this—saving you time and hassle.

3. Sign Up for MTD with HMRC

Before submitting MTD returns, you must officially register for MTD with HMRC. This is done through your HMRC business tax account or through your software provider.

4. Schedule Quarterly Updates

For those under MTD for Income Tax, quarterly updates will replace the single-year-end tax return. You’ll send:

• 4 quarterly income and expense summaries
• 1 annual final declaration

Make sure your accounting software is set to remind you when each update is due.

5. Get Professional Support

If you’re unsure how MTD applies to you or how to implement digital tools, it’s wise to get professional help. At Equitax, we provide tailored MTD onboarding, setup, and training—so you don’t fall behind on compliance.

Final Thoughts

Making Tax Digital isn’t just about following rules—it’s about building a smarter, more streamlined business. By moving to digital systems early, you’ll gain better visibility into your finances, reduce tax-time stress, and avoid penalties.

Whether you’re a sole trader, freelancer, or landlord, MTD compliance is achievable—and we’re here to help every step of the way.

👉 Need help setting up your MTD software or understanding what applies to you?

Schedule a Free Consultation with our expert team today.