MTD is a government initiative aimed at modernizing the tax system by moving businesses and individuals to a fully digital tax system, making the process of submitting tax returns more efficient, accurate, and transparent.  This has been slowly introduced since 2022:

• Corporation Tax -  mandated after April 2026
• VAT - mandated since 2022
• Income tax (replacing SATRs) - mandated from April 2026

What does this mean for you and/or your business?

Administrative changes:

1. Digital Record-Keeping: Businesses are required to keep digital records (specialist software or Excel spreadsheets) of their income and expenses rather than relying on paper-based systems.  Individuals can either purchase this themselves or appoint a business to do this on their behalf.
2. Have compatible software for digital tax returns -   taxpayers must use compatible software that connects.  directly with HM Revenue and Customs (HMRC),  eliminating the need for paper tax returns.  If you have    purchased a specialist software for bookkeeping this may also be compatible for submitting your return to HMRC

Reporting periods : 

1. Quarterly Reporting for VAT: this has already been in place since 2022.  Businesses above a certain turnover threshold must submit their VAT returns quarterly, rather than annually, through compatible software.
2. Income Tax:  there will be a phased implementation for the quarterly reporting of income tax for self employed individuals and businesses starting in 2026 
3. Corporation Tax: there will be a phased implementation of quarterly reporting for self employed individual and  businesses - this won’t be implemented before 2026. No date set. 

Key Benefits:

• Reduced Errors: Digital records and automated submissions reduce the likelihood of errors in tax reporting.
• Real-Time Data: The system allows for up-to-date, real-time financial data, making it easier for businesses to manage their tax affairs and avoid penalties.
• Efficiency: Automation simplifies processes for both taxpayers and HMRC.

Requirements:

• HMRC VAT registration:  If you haven’t already, businesses with a taxable turnover above the VAT registration threshold must         register with HMRC and comply with MTD reporting. 
• HMRC income tax registration: all self employed individuals and businesses that are over the thresholds must register with HMRC in time for April 2026. 
• Software: Businesses must use MTD-compatible accounting or bookkeeping software (like Xero, QuickBooks, or Sage).
• Time: businesses and self employed individuals must make time for keeping up to date records and reporting. 

MTD aims to streamline the tax process, making it easier for both the government and taxpayers, while ensuring that taxes are paid accurately and on time