The UK government’s Making Tax Digital (MTD) initiative is changing the way businesses manage their taxes. Whether you run a sole trader business, a small company, or are VAT-registered, staying compliant with MTD is essential to avoid penalties and streamline your tax reporting.
What is Making Tax Digital?
MTD is a government scheme designed to make tax administration more efficient and reduce errors. It requires businesses to:
- Keep digital records of income and expenses
- Submit tax returns to HMRC using compatible software
- Comply with quarterly reporting for VAT and, in the future, Income Tax for self-employed businesses
Who Needs to Comply?
Currently, MTD applies to:
- VAT-registered businesses with a turnover above £85,000
- Certain self-employed and small businesses preparing for MTD for Income Tax (pilot phase)
Even if you are not yet required to comply, adopting digital accounting early can help you stay ahead.
Benefits of MTD Compliance
Using MTD-compliant software and processes can help your business:
- Reduce errors in tax returns
- Save time on manual bookkeeping
- Gain real-time insights into business finances
- Avoid HMRC penalties for late or incorrect submissions
How to Prepare for MTD
To prepare your business:
- Choose compatible accounting software such as Xero, QuickBooks, or Sage.
- Digitise your records – keep invoices, receipts, and bank statements electronically.
- Integrate reporting – submit VAT or Income Tax updates directly through software.
- Seek professional guidance – accountants can help ensure your system is MTD-ready.
Final Thoughts
Making Tax Digital is more than just a compliance requirement—it’s an opportunity to improve efficiency and gain control over your finances. By preparing early and using the right software, businesses can stay compliant and reduce stress around tax obligations.
Need help getting ready for MTD?
Contact Bolton Tax Accountants today for expert support with MTD for VAT and Income Tax, ensuring your business is fully compliant and digitally organised.