The Making Tax Digital (MTD) agenda has been around since before the pandemic but the effects of Covid (amongst other things) have meant that its introduction has perhaps not been quite as plain sailing as HMRC might have hoped. Fortunately, NCF member Chas Milner of Accord Accountants is on hand to keep us abreast of the latest developments. This article is based on his update to us at the end of March 2025.
What is MTD?
In principle, as Chas explained, the Making Tax Digital agenda is a sensible one. There are clear benefits to encouraging anyone in business to move to online record keeping: being better aware of your costs and turnover, and reducing time spent doing bookkeeping admin’ are just two of them. For HMRC, the benefits include reducing paper records and reducing opportunities for tax fraud. A benefit for Chas (and no doubt many other accountants) will be the reduction in the number of clients who turn up with a shoebox full of receipts to be organised at the end of each tax year!
So where is MTD now?
To date (March 2025), all VAT registered organisations should now, legally, be registered to submit their VAT returns digitally using appropriate software. This process started in 2018 so relevant businesses have had plenty of notice – and there is a £ 5,000 fine for any who haven’t done so yet. If you are a new VAT registered business, HMRC will register you automatically.
For self-assessment income tax returns (for the self-employed or landlords), the goal posts have shifted. Anyone could be applicable to sign up to submit electronically as soon as they want to; this certainly shows willing and helps HMRC finesse the process. The legal requirement, however, is now a two-stage process:
- If your income (from property or self-employment) is more than £50,000 in the 2024/25 tax year, you will need to submit your self-assessment tax return digitally by 31st January 2026.
- And if your income is more than £30,000 in the 2025/6 tax year, you will need to submit your self-assessment tax return digitally on or before 31st January 2027.
Income tax returns will need to be submitted quarterly, digitally, and tax will also be paid quarterly, with the annual tax return reconciling the four quarterly returns and payments.
Notes and exemptions
Chas notes that, to date at least, limited companies are exempt from submitting digitally (other than for their VAT, if applicable), although he suggested there “is a plan” for them from 2028.
There is – currently – no legal requirement for self-employed people or landlords to have a business bank account to manage their business income. Going forward, particularly as individuals are required to file digitally, there will certainly be a need to have a separate bank account for their business. There does not seem to be any information about whether that account could be a personal bank account (just separate) or if it will need to be a business account. If it does, Chas’s advice is to keep an eye out for any banks offering good deals or reduced fees on business banking.
Chas’s advice was to speak to your own accountant or bookkeeper to discuss your specific business needs and plans going forward. Each individual’s needs will be different so generic advice isn’t appropriate. He also suggested that most finance professionals are already working with compatible software so will be able to share some pros and cons of each. They may also offer training on using them (ACE run training for Intuit Quickbooks, for example).
Finally, Chas notes that the requirement is that “you or your agent” must submit digitally when you qualify. There is no particular software specified to do this but many established accounting programmes are compatible. If you really don’t want to subscribe to compatible software, it may be possible that your accountant is willing to submit on your behalf, but you will need to be prepared to pay them to do that for you.
Further information
To pick Chas’s brains further, you are welcome to contact him and his team at: https://accordaccountantscf.co.uk/
If you need to calculate your qualifying income for digital self-assessment submissions, you can use the calculator here: https://www.gov.uk/guidance/work-out-your-qualifying-income-for-making-tax-digital-for-income-tax
To find out which software is compatible with self-assessment income tax returns, check here: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax
To apply for an exemption from MTD, read the conditions and requirements here:https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax
To voluntarily sign up to MTD for self-assessment income tax, click here to check you are eligible: https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax
If you are a VAT registered business and still need to identify appropriate software, speak to your own accountant or bookkeeper for advice or browse the list here: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-vat