Making Tax Digital

If your business is VAT registered then you will be signed up for Making Tax Digital for Business.

Making Tax Digital is HMRC digitising the tax system to make it easier for individuals and business to get their tax right. By keeping records digitally, it is thought that record keeping will be more timely and accurate. At the moment there are no plans to collect taxes any sooner than the payment dates in place.

Keep digital records – your accounting records must be kept digitally either using accounting software or spreadsheets.

Send quarterly updates (your VAT return) to HMRC – there must be no break in the link between your digital records and the update sent to HMRC. 

HMRC have agreed that keeping your accounting records on a spreadsheet will be acceptable for Making Tax Digital. However, the link to HMRC must be digital, you cannot type the figures into HMRC online as you do now. You will therefore need to combine your spreadsheets with third-party commercial software.

HMRC have published a list of Making Tax Digital compliant software.

By recording accounting transactions digitally and closer to the date of the transaction you can have a more up to date and accurate picture of your business’ finances and profit. If you’re using a cloud based software package, you can give your accountant access so that they can review your recording, check your VAT returns, prepare your accounts or help with any questions you have. Most software packages also have a bank feed so the transactions can be posted directly from your bank account with little input from you which will save you time.

From April 2026, Making Tax Digital will be implemented for sole traders and landlords with more than £50,000 of income. Updates of income and expenses will need to be filed with HMRC quarterly.

Sole traders and landlords with more than £30,000 of income will be required to comply with Making Tax Digital from April 2027.

If you need any help with getting ready for Making Tax Digital then please contact us.