The shift toward digital tax compliance isn’t just another HMRC initiative, it’s a fundamental change in how UK businesses will manage, record, and report their financial information. Making Tax Digital (MTD) is reshaping the compliance landscape, and for accountants and small business owners, understanding what’s coming is essential for staying ahead.
What Is Making Tax Digital?
Making Tax Digital is HMRC’s long-term plan to modernise the UK tax system by requiring digital record-keeping and software-based submissions. The aim is to reduce errors, improve accuracy, and streamline the tax process for businesses and HMRC alike.
For accountants, MTD represents both a challenge and an opportunity, a chance to modernise client processes, reduce manual work, and offer more value-added advisory services.
Who Is Affected by MTD?
MTD is being introduced in phases, and different groups are being brought into the system gradually.
Already mandatory
- All VAT-registered businesses, regardless of turnover, must keep digital VAT records and file VAT returns using MTD compatible software.
Coming next
- Self-employed individuals and landlords earning over £50,000 will join MTD for Income Tax Self Assessment (ITSA) from 6th April 2026.
- Those earning over £30,000 will follow in April 2027.
MTD for Corporation Tax is expected later, but no implementation date has been confirmed.
For accountants, this means a growing number of clients will need support transitioning to digital systems over the next few years.
What Will Change Under MTD?
- Digital record-keeping becomes mandatory
Paper records and manual spreadsheets will no longer be sufficient unless used with approved bridging software.
- Quarterly updates replace annual-only reporting
Instead of one annual tax return, businesses will submit quarterly updates to HMRC.
End-of-year submissions
At the end of the tax year, clients will complete:
- An End of Period Statement (EOPS)
- A Final Declaration (replacing the traditional Self Assessment return)
Software becomes central to compliance
Businesses must use MTD-compatible software such as:
- Xero
- QuickBooks
- Sage
- FreeAgent
For accountants, this means standardising software where possible and helping clients choose the right tools.
What This Means for Accountants
- More regular client contact
- Opportunities for advisory services
- Streamlined workflows
Client education becomes essential
Many small businesses still rely on paper or spreadsheets. Helping them understand the benefits of digital bookkeeping will be key to a smooth transition.
How to Prepare Now
- Choose the right software
- Select a platform that suits your business size and needs. Accountants may want to standardise software across clients for efficiency.
- Digitise your processes
- Start scanning receipts, using digital invoicing, and connecting bank feeds.
- Review your bookkeeping habits
- Quarterly reporting means you’ll need consistent, up-to-date records.
- Train your team or clients
- Offer training sessions, guides, or checklists to help everyone understand the new requirements.
- Start early
- Don’t wait until the deadline, transitioning now gives you time to iron out any issues.
Did you know CRO can provide a Managed Company Secretarial Service as a comprehensive option to outsource all your company secretarial work?
In light of the new changes to Making Tax Digital, our service can save hours of time and ensures all your clients statutory documents all always up to date allowing you more time and space to concentrate on the tax implications. CRO provides first class professional advice and support, ensuring Companies House filings are made on time, and keeping your minute books and share certificates properly maintained.
If you would like any further information on our services, please contact Alice Spencer on 0161 440 8884 / [email protected].
