The UK government’s Making Tax Digital (MTD) initiative is transforming the way businesses and individuals interact with the tax system. Launched as part of a broader effort to simplify tax administration and make it easier for taxpayers to get their tax right, MTD is a critical step toward the complete digitalisation of the UK’s tax regime. As we approach 2026, it is essential to understand the key deadlines, requirements, and how businesses can prepare to ensure they remain compliant.
What is Making Tax Digital (MTD)?
Making Tax Digital is a UK government programme designed to modernise the tax system. Its goal is to reduce errors, streamline the process of tax filing, and ultimately make tax administration more efficient. Under MTD, taxpayers are required to keep digital records and submit tax returns through compatible software. This shift to a digital-first approach is intended to reduce the likelihood of errors, improve accuracy, and provide real-time insights into tax liabilities for both HMRC and businesses.
Initially, MTD was introduced in stages, starting with VAT, and in 2026, the system is expected to cover more areas, such as income tax for self-employed individuals and landlords.
MTD Key Deadlines for 2026
Understanding the critical deadlines for MTD is crucial for businesses and individuals to avoid penalties. Here are the key dates you need to be aware of in 2024:
- April 2026: MTD for Income Tax Self-Assessment (ITSA) for Self-Employed and Landlords
From April 2026, self-employed individuals and landlords earning over £10,000 annually will be required to comply with MTD for Income Tax Self-Assessment (ITSA). They must keep digital records of their income and expenses and send quarterly updates to HMRC through MTD-compatible software. This is a significant expansion of the MTD programme and represents the next phase in the government’s plan to make tax reporting easier and more efficient. - April 2026: General Partnerships Required to Comply
Partnerships will need to comply with MTD regulations starting April 2026. This aligns with the requirement for unincorporated businesses and landlords. - VAT: Ongoing Requirement
Since April 2022, all VAT-registered businesses have been required to follow MTD rules for VAT. This requirement is ongoing, meaning any VAT-registered business, regardless of turnover, must submit their VAT returns digitally using compatible software.
MTD Requirements: What Does MTD Compliance Mean?
MTD compliance means following a set of rules and guidelines established by HMRC for digital tax reporting. To be MTD-compliant, businesses must:
- Keep Digital Records
MTD mandates that businesses must store and maintain their financial records digitally. These digital records can be stored on any MTD-compatible software, and they must cover all relevant financial information, including income, expenses, and VAT transactions for VAT-registered businesses. These digital records must also be kept in a format that can be readily submitted to HMRC. - Use MTD-Approved Software
Making Tax Digital compliance requires the use of compatible software for maintaining records and submitting tax returns. HMRC has a list of approved software providers that offer the necessary tools to manage digital records and file tax returns. The software should be able to maintain records, generate and send updates to HMRC, and receive and process acknowledgments from HMRC in return. - Quarterly Submissions
Businesses and individuals subject to MTD for ITSA will need to submit quarterly reports of their income and expenditure. This process will replace the traditional once-a-year submission, providing HMRC with more frequent updates. These submissions should be made via compatible software, and there is no longer the option to submit manually. - Final End-of-Period Statement
At the end of the tax year, a final declaration or end-of-period statement will be required. This statement will reconcile the quarterly submissions, ensuring that the final figures submitted to HMRC are accurate and account for any adjustments. Once the final submission is made, taxpayers will receive their tax liability calculation.
How to Prepare Your Business for MTD
For businesses that are not yet compliant with MTD, it is essential to start preparing as soon as possible. Here are practical steps to ensure your business is ready for MTD in 2026:
- Evaluate Your Current Accounting System
If your business is still using manual records or outdated software, the first step is to assess your current system. Determine whether your software is MTD-compatible or if you need to switch to a new platform that meets HMRC’s digital requirements. - Choose the Right Software
HMRC provides a list of MTD-approved software providers, so it’s crucial to choose the right one for your business. The software should allow you to keep digital records, manage VAT returns (if applicable), and file quarterly updates seamlessly. Popular options include QuickBooks, Xero, and Sage, but you should pick one that aligns with your specific needs and budget. - Train Your Staff
Ensuring that your staff is up-to-date with the new processes is vital. Provide adequate training for employees who handle bookkeeping and tax preparation. This will ensure they know how to use the MTD-compatible software and understand the new submission timelines. - Start Digital Record-Keeping Early
Begin transitioning to digital record-keeping as soon as possible, even if you’re not yet required to submit under Making Tax Digital. This will give you time to adjust and work out any issues before the mandatory deadlines. It’s better to get familiar with digital processes well in advance to avoid last-minute stress. - Monitor Key Deadlines
As you prepare for MTD, make sure to keep track of the key deadlines relevant to your business. This will help you stay compliant and avoid penalties for late submissions. Set reminders for quarterly submissions and ensure that your final year-end statement is submitted on time. - Seek Professional Help if Needed
For more complex businesses, it may be beneficial to seek advice from a professional accountant or tax advisor. An accountant can help ensure your business is fully MTD-compliant and that your records are accurate and up to date.
Conclusion
Making Tax Digital represents a significant shift in the UK’s tax landscape, but with proper preparation, businesses can make the transition smoothly. By keeping up with the key deadlines, investing in MTD-compliant software, and preparing your team, your business will be well-positioned to meet the requirements of this digital-first tax system. As 2026 approaches, it’s essential to start planning and implementing the necessary changes to ensure full compliance and to take advantage of the benefits that MTD can offer in terms of efficiency and accuracy.
