MTD Frequently Asked Questions
Making Tax Digital is coming, are you ready?
What is MTD?
Making Tax Digital (MTD) is part of the government’s ongoing plan to ensure all taxpayers use software for accounting and reporting that relates to tax.
What is the purpose of MTD?
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.
Who needs to do MTD for ITSA?
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. This has been pushed back by the Government from April 2024, allowing more time for both the Self Employed, and the Government to make ready.
Those with an income of between £30,000 and £50,000 will need to do this from April 2027.
What is compatible software?
We use Xero for all our cloud based accounting needs internally, and the majority of our clients now also use it, however there are other options, we have listed some of what is on offer below:
Is Making Tax Digital only for VAT?
No. Self-employed businesses and landlords with annual business or property income above £30,000 will need to follow the rules for Making Tax Digital for Income Tax. The legislation will also apply to partnerships
Can I still use spreadsheets?
Yes, as long as digital links are used correctly.
You’ll need to have formulas in place so that inputting transaction details automatically update totals in another cell or worksheet. Bear in mind that, while it’s still possible to use spreadsheets for MTD, it can be problematic. Inputting your transactions into a spreadsheet is risky because you could still make a mistake.
Spreadsheets must be API-enabled to comply with Making Tax Digital. API enabled spreadsheets combined with accounting software can submit information to HMRC digitally.
Or, they can be used for digital record keeping, and submit the required information to HMRC directly.
There’s no cut-off date for using spreadsheets for Making Tax Digital. However, as further stages of the legislation roll out, it’ll be harder to use spreadsheets.
Complex formulas are required to integrate multiple spreadsheets, and these can fail. The same records you would need multiple spreadsheets for can all be captured in one piece of cloud-based accounting software.
Do all self-employed people have to go digital?
The short answer is yes. Unless you have an exemption, if you meet the criteria then you have to comply with MTD for ITSA.
Making Tax Digital News & Updates
From April 2026, self-employed individuals and landlords with an income of more than £50,000 will be required to keep digital records and provide quarterly updates on their income and expenditure to HMRC through MTD-compatible software. This has been pushed back by...