What Is Making Tax Digital (MTD) and How Does It Affect You?
Making Tax Digital (MTD) is one of the most significant changes to the UK tax system in recent years — and it’s already affecting thousands of businesses and landlords. If you’re self-employed or earn rental income, it’s important to understand how MTD works, when it will apply to you, and what you need to do to stay compliant.
Here’s a clear breakdown of what MTD is, who it applies to, when it affects you — and how we at Harish Accountants will support you through the changes.Curabitur ut nulla magna.
What Is Making Tax Digital?
Making Tax Digital is HMRC’s initiative to modernise the UK tax system. It requires certain individuals and businesses to:
- Keep digital financial records
- Use HMRC-approved software
- Submit tax information quarterly (instead of once a year)
This means paper-based or manual records are no longer acceptable for those within the MTD system.
Why Is HMRC Doing This?
From HMRC’s perspective, MTD is about reducing tax errors, which they say cost the UK billions each year. HMRC believes that:
- More frequent updates will reduce year-end surprises and underpayments
- Digital record-keeping will increase accuracy
- Automation and software will reduce human error
- The system will be more efficient, transparent, and harder to misuse
HMRC says MTD will make the tax system:
“more effective, more efficient, and easier for taxpayers to get their tax right.”
Who Does It Affect?
MTD applies to different groups in phases, depending on income level and business type:
✅ Already Affected:
- All VAT-registered businesses (regardless of turnover)
Coming Soon:
- Self-employed individuals and landlords with combined turnover over £50,000 will need to comply from April 2026
- Those with combined turnover between £30,000 and £50,000 will follow from April 2027
- Those with combined turnover between £20,000 and £30,000 will follow from April 2028
Turnover means total income from all sole trader businesses and UK property letting combined — not profit.
❌ Not Affected (for now):
- Company directors who only receive PAYE
- General partnerships (start date still to be announced)
- Individuals with combined turnover under £20,000
Key Dates Summary
| Taxpayer Type | MTD Start Date | Applies To |
| VAT-registered businesses | Already live | VAT returns via MTD-compliant software |
| Self-employed and/or landlords (turnover > £50k) | April 2026 | Quarterly digital income tax reporting |
| Self-employed and/or landlords (£30k–£50k) | April 2027 | Quarterly digital income tax reporting |
| Self-employed and/or landlords (£20k–£30k) | April 2028 | Quarterly digital income tax reporting |
| General partnerships | Date TBC | Not currently affected |
What Do You Need to Do?
If MTD applies to you, you’ll need to:
- Keep digital records – Paper or spreadsheet-based records won’t be sufficient
- Use MTD-approved software – Such as Xero, QuickBooks, or FreeAgent
- Submit tax updates quarterly – Replacing the annual self-assessment return
- Submit a final year-end declaration – To confirm annual figures
What Harish Accountants Will Do for You
At Harish Accountants, we make MTD compliance simple and stress-free. We will:
- Confirm whether MTD applies to you, and from when
- Set you up with HMRC-approved cloud accounting software
- Manage your digital records and submissions
- Provide support, training, or full bookkeeping services depending on your needs
- Ensure nothing gets missed or filed late
What This Means for Fees and Software Costs
Because MTD requires quarterly submissions instead of just one annual tax return, this increases the work involved. As a result:
- Our fees will reflect the additional work and frequency of reporting
- Billing will shift from annual to quarterly or monthly for affected clients
- There may also be additional software costs depending on which digital platform you use — we’ll advise the best option based on your needs and budget
Not Sure If MTD Affects You?
If you’re unsure whether you fall within the MTD rules — or want to prepare early — we’re here to help.
info@harish.co.uk | 01933 273910
We’ll explain everything clearly and help you get ready with confidence.