For further insight into MTD, please see the Frequently Asked Questions below.
What is MTD?
In the words of HMRC, MTD is about ‘helping businesses to get their tax right’. Underpinning its introduction is the goal of addressing the tax lost every year due to errors.
What are the advantages of MTD?
With the right software and reporting procedure MTD gives businesses:
- a clear view of their tax obligations
- access to their tax information online in one place
- the ability to work collaboratively with advisors and agents
- the ability to plan and budget effectively
Who does MTD apply to?
The first tax to come under the wing of MTD was VAT which started in 2019, it was not compulsory until 2022 for all businesses to be registered to operate their VAT submissions under the MTD regime. All VAT registered businesses are now MTD compliant.
MTD for Income Tax applies to self-employed individuals and landlords with turnover over £50,000 (from April 2026), £30,000 (from April 2027) and £20,000 (from April 2028).
Is MTD compulsory?
Yes, if you meet the requirements for MTD for Income Tax or you are VAT registered then MTD is compulsory.
Exemptions can include:
- Digitally excluded due to age, disability or remoteness
- Religious societies
- Insolvent
- Registered as providing qualifying care such as a foster carer
When does MTD start?
MTD for VAT is already in operation and any new VAT registered businesses have to start being compatible with MTD straight away however for MTD for Income Tax the mandatory start dates are April 2026 for income (turnover) over £50,000, April 2027 for income over £30,000 and April 2028 for income over £20,000.
How do I register for MTD?
MTD for Income Tax isn’t mandatory until April 2026 (for the £50,000 threshold however you can sign up to MTD for Income Tax voluntarily from April 2025 as part of HMRC’s public Beta testing process. Please follow this link to sign up: www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax
You do not need to register for MTD for VAT as any new VAT registrations are automatically signed up when registering.
Is MTD only for Income Tax and VAT?
HMRC are intending to include MTD for partnerships however no date has been set for these at present.
What software do I need for MTD?
Under MTD businesses must keep and maintain digital records of all transactions using MTD-compliant software.
Will HMRC provide free software for MTD?
HMRC will not provide free software for MTD. Businesses are encouraged to seek the professional guidance of their accountant or bookkeeper who can help them select the right software for MTD returns. You can also review the available software on HMRC’s website.
How to keep your tax records in one place
Perrys Accountants offer clients an exclusive service for keeping all their tax return records in one place – our One Click system. This secure client portal is a way of making your record keeping more efficient and will facilitate your adoption of MTD. Caroline Goodsell of Perrys explains the benefits and how One Click works in the following video.
