Making Tax Digital for VAT
All VAT-registered businesses are required to use MTD-compliant software to keep digital records and submit returns.
What Is Making Tax Digital?
Making Tax Digital (MTD) is a government-led initiative to move UK taxpayers’ records from spreadsheets and paper to a fully digitalised system. It currently applies to VAT-registered businesses but will imminently apply to Income Tax records for self-employed individuals and landlords with an income of over £50,000 (April 2026).
The three headline changes that you need to be aware of:
Digital Record-Keeping
All transactions (income and outcome) must be kept digitally in an HMRC-approved software.
Quarterly Updates
Compulsory Quarterly Updates will be required by HMRC, which can only be submitted on MTD-compliant software. You will need to report all income and expenditures for each 3 month period and going forward a spreadsheet wont cut it!
Final Declaration
Once you’ve submitted all four quarterly updates in one year, you need to finalise your annualised income with a final declaration.
Why Is Making Tax Digital So Important?
Legislations are changing which require businesses turning over £50,000 annually, to digitalise their business records and report more regularly to HRMC. These changes are coming into play from April 2026.
Switching to a digital system benefits business owners by providing clarity on tax obligations and financial transactions. This enhances budgeting, speeds up administrative tasks, and improves accuracy. Although it may seem daunting, Rosemary Bookkeeping can simplify the process through partnerships with top UK HMRC-approved software and years of experience, alleviating concerns about Making Tax Digital (MTD).
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Who Needs To Comply With Making Tax Digital?
The key sectors or people that need to comply with MTD for ITSA are businesses that are self-employed or sole traders and UK landlords with annualised income thresholds of:
Over £50,000
(April 2026)
Over £30,000
(April 2027)
Over £20,000
(April 2028)
Qualifying businesses must submit quarterly reports to HRMC, maintain digital records, and provide an end-of-year return at the end of each tax year. This is something that our bookkeepers are well-equipped to support you with.
If you’re not sure whether this applies to you or see that you have a few years to get things straight ahead of your threshold, now is the time to act! We’re primed to support you in MTD best practice. So, whether this applies to you right now or in the future, our bookkeepers are on hand to support you with onboarding to various HMRC-approved accounting software or help you get the most out of your current subscription to keep you compliant with government changes as they occur.
When Do Making Tax Digital Changes Come Into Play?
MTD for IT for general partnerships and Corporation Tax is yet to be announced, but watch this space!
If you’re a small business, landlord or sole trader looking for help with Making Tax Digital, give us a call; we’re here to help!
MTD: What’s In It For Me?
At Rosemary Bookkeeping, our mission is to help lighten the load of financial admin, giving you the time back to focus on your business where you know best. Making Tax Digital, in essence, is also about helping you achieve the same, and that’s why we’re so passionate about offering our services to help you become compliant ahead of time:
Simplified and Streamlined Processes
All HMRC-approved software helps keep financial administration in one place, automates repetitive tasks, and provides clear insights to help you make better-informed decisions about the future of your business.
Improved Accuracy: Fewer mistakes, lower cost, lower stress
Automating financial administration and managing digital records in real-time simplifies the submission of reports and annual declarations. This approach reduces mistakes, lowering the risk of penalties and extra costs.
Improves data protection and safety
Using HMRC-approved software also keeps your data safe. Most of these platforms will always require 2FA, so that even when you’re out and about, you can rest assured that your business data is compliant, safe, yet still available at the click of a button.
Easier to collaborate with accountants and clients
Digitising your transactional admin enhances client experience and simplifies coordination with accountants for report preparation. Most accountants are familiar with this software, allowing them to manage your accounts efficiently throughout the tax year.
How To Get Started?
Step 1
Step 1 – Download our FREE MTD Fact Sheet & Check List’
Click the button below to sign up for our free check list
Step 2
Reach out to your local Rosemary Bookkeeper
The first thing we’ll do is discuss any software that you’re already using or walk you through your options so we can agree on the best fit for you.
Step 3
Register with HRMC
Depending on your income threshold, ensure you’ve registered with HRMC before the deadline in April 2026, 2027, or 2028. Using the advice from your local Rosemary Bookkeeper to ensure this is done accurately, first time round.
Step 4
Tick MTD off your to-do list
We’re experts at managing your books, which is key to staying compliant with MTD changes. We’ll get to know how you work now and help you through the transition, so your routine isn’t disrupted much, and the admin workload gets easier.
Frequently Asked Questions
What is Making Tax Digital?
New legislation introduced by HMRC that’s designed to make it easier for taxpayers to get their taxes right by adopting software to manage transactions and accounts, making it easier to process information for tax purposes.
I’m not sure Making Tax Digital applies to me. How do I know?
If you’re a VAT-registered business, MTD compliance came into effect from April 2022. If you’re a VAT-registered business and not compliant or not sure that you are, please speak to a Rosemary Bookkeeper as soon as possible. We will be able to advise and support you with any actions that you need to take to avoid any further penalties.
If you’re a sole trader, landlord or self-employed, earning over £50,000 in revenue, you have until April 2026 to be compliant with MTD. If you’re unsure, please speak to your nearest Rosemary Bookkeeper today.
When do I need to be compliant by?
The deadline will vary depending on your annualised income.
- £50,000 turnover or above – you need to be compliant by April 2026
- £30,000 turnover or above – you need to be compliant by April 2027
- £20,000 turnover or above – you need to be compliant by April 2028
Regardless of your threshold, we strongly recommend adopting MTD best practices now. There are many benefits for your business in adopting this approach to managing your financial admin.
Do I need to follow the rules of MTD for VAT?
If you’re a VAT-registered business, MTD compliance came into effect from April 2022. If you’re a VAT-registered business and not compliant or not sure that you are, please speak to a Rosemary Bookkeeper as soon as possible. We will be able to advise and support you with any actions that you need to take to avoid any further penalties.
I’m VAT-registered but not MTD-compliant. Can you help?
If you’re a VAT-registered business, MTD compliance came into effect from April 2022. If you’re a VAT-registered business and not compliant or not sure that you are, please speak to a Rosemary Bookkeeper as soon as possible. We will be able to advise and support you with any actions that you need to take to avoid any further penalties.
What happens if I don’t follow the MTD rules?
HMRC will follow a points-based penalty system for late submissions and payments under the new Making Tax Digital regulations. This system offers businesses a chance while encouraging on-time submissions. Under the new rules, if you fail to meet a submission deadline, you may not be automatically penalised. This translates into a points-based penalty system that is designed to punish offenders proportionately, rather than for honest mistakes. There are separate penalties for noncompliance with VAT and Income Tax submissions, meaning penalties could apply to both if either is missed. Furthermore, late payment penalties are also being introduced, calculated based on the duration of the delay. Within 15 days, no penalty applies.
What are the rules for MTD for Income Tax?
Phase 1 of MTD was introduced in April 2019, making it mandatory for all VAT-registered businesses with taxable income over £85,000 to keep digital records. In April 2022, this was expanded to ALL VAT-registered enterprises, including those that fall below the VAT threshold.
For income tax self-assessments, you need to be aware of the following deadlines and ensure that you’re all up to date, ahead of time.
- April 2026: MTD for Income Tax Self Assessment mandates unincorporated (sole traders and partnerships) businesses and landlords with gross income above £50,000.
- April 2027: MTD for Income Tax Self Assessment mandates unincorporated (sole traders and partnerships) businesses and landlords with gross income above £30,000.
- April 2028: MTD for Income Tax Self Assessment mandates unincorporated (sole traders and partnerships) businesses and landlords with gross income above £20,000.
How can Rosemary Bookkeeping help me with MTD?
We offer cloud-based bookkeeping solutions which encourage you to digitalise your finances from the outset. This all works towards promoting best practices for MTD. We’re experts in all things bookkeeping and financial administration and have invested considerable time in ensuring we’re equipped to support sole traders and landlords digitalising their finances for tax purposes, and to help business owners make better-informed decisions about their business growth.
Our bookkeepers are certified to maximise some of the UK’s top HMRC-approved software (Xero, QuickBooks, Sage, and so many more!) and have commercial partnerships with most, offering you competitive subscription rates and additional access to features that they offer. Whether you’re deciding which one is the best fit for you or want some support with onboarding and that all-important transition, our bookkeepers are on hand to ensure you benefit from using this software to the best of their capabilities, maximising value for money and giving you more confidence in your numbers.
How does meeting the Making Tax Digital legislation benefit me?
Making Tax Digital (MTD) is changing how businesses and landlords report their finances to HMRC. While this might feel like extra admin, the good news is, you don’t have to face it alone. Here at Rosemary Bookkeeping, we can make MTD work for you, not against you. Here’s how:
- Stay Compliant: Avoid mistakes and late submissions.
- Save Time: Let someone else manage the figures while you focus on running your business or properties.
- Keep Accurate Records: Every expense tracked, every figure correct.
- Financial Clarity: Know your tax position in real time.
- Software Sorted: Get expert support with MTD-compliant tools.
- Reduce Stress: Confidence that your finances are in safe hands.
For sole traders and landlords, a bookkeeper doesn’t just help with MTD; they give you peace of mind, better control of your money, and the freedom to focus on growth.
I’m already using software, what’s different about MTD?
If you’re already keeping digital records, Making Tax Digital (MTD) will add new requirements for your tax reporting.
Under MTD for Income Tax, you’ll also need to provide quarterly updates as well as an annual return, which means you’ll need to keep records accurate and up to date throughout the year. If your current system isn’t MTD-compliant, you’ll need to switch to compatible software. This is something we can support you with at Rosemary Bookkeeping. Enquire today for expert support.
I’m not using any software currently. Can you help?
No matter how big or small your business, we always advocate for digitising your financial administration. Working with a Rosemary Bookkeeper, we can help you assess which HMRC-approved software is the best fit for you and your business and then support you with onboarding and all the administration that comes with transitioning from spreadsheets or paper with minimal disruption to your business day-to-day.
I’m using software but want to switch. Can you help?
We generally wouldn’t recommend switching if you’re already subscribed to a HMRC-approved accounting software; however, if you’re struggling to navigate the system, or have any bug-bears, we’re able to support you in making the most out of your subscription or look at others that may be better suited.
Can I use my Spreadsheet to submit VAT returns?
A: Yes, you can still use spreadsheets for your record–keeping under MTD legislation, but you must be aware that to remain compliant, your spreadsheets must be part of a system that can submit data directly to HMRC. This means you’ll need to use software that can link your spreadsheet data to HMRC’s system for tax submissions. If this sounds technical and you’re unsure what to do next, speak to a Rosemary Bookkeeper today.
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