Tag Archive for: Making Tax Digital Guide

Your October Checklist for the 7th November MTD Deadline

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The deadline for the 7th November MTD submission is approaching.

For sole traders and landlords who began Making Tax Digital for Income Tax in April 2026, this marks the second quarterly update of the first mandatory MTD year.

October is your last full month to ensure your bookkeeping is accurate, your digital records are complete, and your software is prepared.

Waiting until November to review everything leaves you little time to resolve missing transactions, unreconciled accounts, or software issues.

Use this October checklist to prepare now.

What is the 7th November MTD deadline?

The 7th November MTD deadline is the deadline for the second Making Tax Digital for Income Tax quarterly update of the 2026/27 tax year.

For businesses with standard update intervals, the second update encompasses records from 6 April to 5 October 2026.

For those using calendar-based periods, it covers 1 April to 30 September 2026. HMRC’s current system applies cumulative updates, meaning your second quarterly update includes totals from the start of the tax year through the end of the specified period, not just the last three months.

Your software calculates these totals from your digital records.

Therefore, October is the ideal time to verify the records supporting these figures.

Your October checklist for the 7th November MTD deadline

1. Check that your first quarterly update was submitted

Begin by reviewing your status as of the first MTD deadline on 7th August.

If you’ve already submitted your initial update, focus on preparing the next one.

If you missed the deadline, don’t assume you can skip ahead to November. HMRC mandates that all quarterly updates be submitted prior to filing your tax return.

Contact your bookkeeper now if you have any pending updates.

2. Make sure your digital records are up to date

Your MTD quarterly update is generated from your digital bookkeeping records.

October is a good time to verify that all entries are complete.

Look for:

  • Sales and other business income
  • Property income, where relevant
  • Business expenses
  • Property expenses
  • Customer invoices
  • Supplier invoices
  • Bank transactions
  • Payments received
  • Refunds or credits

HMRC recommends creating digital records as soon as possible after the transaction date.

If you’re regularly updating your books, this should mainly be a review rather than a catch-up effort.

3. Find any missing receipts and invoices

That receipt you planned to handle later? Later is now.

Make sure you have supporting documentation for the transactions recorded during this period.

Missing documentation can make it difficult to understand the purpose of a payment and whether it was recorded accurately.

Pay particular attention to:

  • Business purchases made personally
  • Online subscriptions
  • Fuel and travel costs
  • Supplier bills
  • One-off purchases
  • Refunds
  • Customer invoices

Identifying gaps early gives you more time to gather the necessary information.

4. Reconcile your bank accounts

Do your bookkeeping records align with your bank account transactions?

Bank reconciliation helps uncover:

  • Missing transactions
  • Duplicate entries
  • Unmatched customer payments
  • Incorrect amounts
  • Payments recorded against the wrong invoice
  • Transactions entered twice

Just because your bank feed imports transactions automatically doesn’t mean everything is accurate.

The software can import data, but you still must verify it.

5. Check your income has been recorded correctly

Review the income received by your business or property activity.

Ask yourself:

  • Have all sales been recorded?
  • Are customer payments matched to the correct invoices?
  • Have any transactions been duplicated?
  • Have refunds been recorded?
  • Is property income complete?
  • Are there payments sitting in your bank feed that have not been dealt with?

If your income records are incomplete, your quarterly totals may be incomplete too.

6. Review your expenses

Next, review the business’s outgoings.

Ensure expenses are recorded accurately and classified appropriately.

While automated bookkeeping tools may recommend categories based on past transactions, these suggestions can sometimes be incorrect.

For instance, two payments to the same supplier could pertain to entirely different purchases.

If you notice anything unusual, investigate and resolve it before finalising your update. HMRC advises that if you discover an error in your digital records during the year, you should correct it promptly.

7. Check each source of income

If you own multiple businesses or have income from self-employment and property, ensure you know what to report.

Under MTD, you are required to submit quarterly updates for each income source.

For example, you might have:

  • One self-employed business
  • A second self-employed activity
  • UK property income
  • Foreign property income

Do not assume a single update covers all sources.

Your bookkeeper can help you understand the proper way to maintain your records.

8. Check your MTD software is still connected

Do not delay addressing software issues until November 7th.

Your compatible software must be authorised and connected to HMRC before it can submit quarterly updates.

During October, check:

  • You can access the software
  • Your bank feeds are working
  • All records are syncing correctly
  • Your HMRC connection is active
  • You know how the quarterly update will be submitted

If you use a bookkeeper, confirm who will complete the submission.

9. Review anything unusual before the deadline

Not every quarter will have simple transactions.

Perhaps you:

  • Bought expensive equipment
  • Received a large refund
  • Changed bank accounts
  • Started receiving property income
  • Stopped a business activity
  • Received an unusual customer payment
  • Made transactions between business accounts

Don’t leave these issues unresolved.

If you don’t understand something, flag it to your bookkeeper for review while there’s still time.

10. Do not wait until 7th November to press submit

7th November is the deadline, not the submission day.

HMRC states that quarterly updates are typically due between the end of the relevant period and the deadline.

Once your records are complete and verified, there’s little benefit in delaying submission until the last minute.

Submitting early allows more time to resolve any technical issues that may arise.

What if you miss the 7 November MTD deadline?

During the 2026/27 tax year, HMRC will not assign penalty points for late quarterly updates.

However, that doesn’t mean the deadline is optional.

You still need to:

  • Maintain the required digital records
  • Send the quarterly update
  • Catch up on any outstanding updates
  • Complete all required quarterly updates before submitting your tax return

Starting from tax years after 2026/27, missing quarterly deadlines may lead to penalty points.

Accumulating four points could result in a £200 penalty, with extra £200 penalties for continued missed deadlines at the threshold.

The first year is crucial for setting up a reliable routine.

Do not make MTD a quarterly panic

A straightforward way to prepare for Making Tax Digital is to shift from treating bookkeeping as a quarterly task.

Updating your books monthly makes the work before each deadline far easier.

By October, your bookkeeping should mainly involve reviewing and finalising records, not recreating them from scratch.

Regular bookkeeping can help you:

  • Keep digital records current
  • Spot missing transactions sooner
  • Identify overdue invoices
  • Reconcile accounts regularly
  • Correct errors before deadlines
  • Reduce the amount of catching up required

The upcoming MTD deadline is always approaching.

Staying up to date with your records means you’re already getting ready for it.

Get ready for the 7th November MTD deadline with Rosemary Bookkeeping

If you see this checklist and notice your records need improvement, October is a great time to address it.

Your local Rosemary Bookkeeper can help you:

  • Bring overdue bookkeeping up to date
  • Maintain your digital records
  • Record income and expenses accurately
  • Reconcile your bank accounts
  • Check transactions for errors
  • Identify missing information
  • Keep your bookkeeping software organised
  • Prepare your records for the 7th November MTD deadline
  • Stay on top of future quarterly updates

The 7th November MTD deadline should not mean spending the first week of November trying to remember what happened months ago.

Use October to get your books checked, updated and ready.

Find your nearest Rosemary Bookkeeper today.

Making Tax Digital Records: What Do You Need to Keep?

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Making Tax Digital records sit at the heart of MTD for Income Tax.

If you are within scope, you must maintain digital records of your relevant self-employment or property income and expenses all year. These records supply the information needed for your quarterly updates to HMRC.

But what exactly should you record, what qualifies as a digital record, and how frequently should you update your bookkeeping?

Here is what you need to know.

What Making Tax Digital records do you need to keep?

Making Tax Digital records should include details about your relevant income and expenses related to business or property.

For each transaction, your digital records usually need to specify the amount, date, and the appropriate income or expense category.

Compatible software then uses these records to determine the totals needed for your quarterly Making Tax Digital updates.

Depending on your situation, your Making Tax Digital records might also include:

  • Self-employment sales and other business income
  • Property rental income
  • Business expenses
  • Relevant property expenses
  • Customer invoices
  • Supplier invoices and bills
  • Payments received
  • Refunds and credits
  • Bank transactions
  • Transaction dates
  • Transaction amounts
  • The appropriate income or expense category

The exact information required will vary based on your business and income sources.

What counts as a Making Tax Digital record?

A Making Tax Digital record involves creating and maintaining financial data electronically as part of your MTD bookkeeping process. This is a crucial point.

It does not mean just keeping your usual paperwork during the quarter and entering totals into software at the deadline.

You must incorporate your income and expenses into a digital record-keeping system.

For example, if you receive a £600 payment from a customer, your bookkeeping should record the amount, date, and category digitally. Similarly, if you pay £200 for a business expense, you must also document that transaction digitally.

The goal is to keep records updated continuously, avoiding the need to reconstruct several months of activity right before deadlines.

Why accurate Making Tax Digital records matter

Your quarterly updates depend on the data in your bookkeeping software.

If the records are inaccurate, the resulting information will also be flawed.

For example, a customer payment might be listed twice because it was entered manually and imported via a bank feed. Or, some expenses may not be recorded yet. The software can only sum totals based on the data it contains.

That’s why, even with automated bookkeeping features, Making Tax Digital records still require regular review.

Remember, digital tools do not automatically guarantee accuracy.

Do you still need to keep receipts and invoices?

Yes. Making Tax Digital changes the way financial records are maintained, but your broader obligation to keep supporting documents remains.

Invoices, receipts, bank statements, and other records still serve as evidence for transactions in your books. Digital receipt capture can simplify this process.

Instead of storing paper receipts in a drawer, you can photograph or scan them and save them with the related transaction in your bookkeeping system.

This makes it easier to locate information later if you or your bookkeeper need to verify a transaction.

Do you send every receipt to HMRC?

No. Your Making Tax Digital quarterly submission typically doesn’t require you to upload each receipt and invoice separately to HMRC.

Instead, your compatible software uses your digital records to sum up your income and expenses. You then submit these totals as part of your quarterly update.

Nevertheless, receiving these totals doesn’t diminish the importance of the underlying records.

Accurate bookkeeping is still essential because your figures must be based on precise records.

Making Tax Digital records for sole traders

If you are a sole trader under Making Tax Digital for Income Tax, your digital records will show your self-employed business’s financial activity.

For example, imagine running a plumbing business. In a month, you complete customer jobs, purchase materials, pay for fuel, receive payments from customers, and pay a monthly software fee.

Record these transactions in your digital bookkeeping software. Recording them regularly makes preparing for your quarterly updates much easier.

However, if you wait until the deadline, you might have to sift through months of bank transactions, receipts, and invoices in a short time.

Making Tax Digital records for landlords

Landlords using MTD must also maintain digital records of their property income and expenses.

This includes rental income and related costs for their property business.

If you have both self-employment and property income, staying organised with your bookkeeping is especially crucial.

Properly distinguishing between different activities in your digital records ensures accurate reporting under Making Tax Digital.

What if you have several properties?

You might own multiple rental properties but only run one UK property business for MTD record-keeping.

However, this doesn’t mean you should neglect maintaining detailed records to track your income and expenses for each property.

Clear records help you understand your financial activity and provide your accountant with the information they need when required.

Your bookkeeper can help you systematically organise these transactions within your bookkeeping system.

How often should you update your Making Tax Digital records?

The quarterly deadline should not be the point when you start your bookkeeping.

Making Tax Digital works best when records are kept consistently throughout the quarter.

For many businesses, doing monthly bookkeeping creates a manageable routine.

Instead of waiting three months, you regularly log transactions, reconcile bank statements, and address missing details.

By the time your quarterly review arrives, your bookkeeping should mostly be ready for inspection.

This also allows more time to fix any issues. Finding a missing invoice a few weeks after a transaction is generally easier than locating it months later.

What happens if you make a mistake?

Since bookkeeping errors are frequent, outsourcing a professional like Rosemary Bookkeeping is crucial.

You might record transactions twice, input the wrong amount, or assign a transaction to the incorrect category.

The key is to correct these mistakes as soon as you find them.

Regularly checking your Making Tax Digital records simplifies this process.

Bank reconciliation is especially helpful because it compares your bookkeeping records with your actual bank transactions. If there are missing entries or duplicates, reconciliation can highlight them.

Can you use spreadsheets for Making Tax Digital records?

Spreadsheets can be part of a Making Tax Digital process in some cases.

However, your setup must comply with HMRC’s digital record-keeping and linking rules. If data is transferred between different software, it might need to be through a proper digital link rather than manual copying.

This can make a seemingly simple spreadsheet process more complex.

If you use spreadsheets now, it’s advisable to verify whether your process will function correctly under MTD before your upcoming reporting deadline.

How do Making Tax Digital records become a quarterly update?

Your compatible software uses recorded digital data throughout the tax year to calculate quarterly figures.

For standard quarterly periods, key deadlines fall on August 7th, November 7th, February 7th, and May 7th. The software manages the submission process, while your bookkeeping provides the underlying information.

This distinction is important. Simply buying compatible software doesn’t guarantee your records are accurate or complete; you still need to maintain the data.

Are your Making Tax Digital records actually up to date?

Before your next quarterly deadline, reflect on these key questions:

  • Have you documented all your income?
  • Have you entered all your business or property expenses?
  • Are there any unfamiliar transactions in your bank feed?
  • Have you completed the bank reconciliation?
  • Can you locate the receipts and invoices supporting your records?
  • Are there any months of bookkeeping that are still unfinished?

If you can’t answer these questions confidently, you likely need to do some work before your next MTD update.

Why regular bookkeeping matters for MTD

Making Tax Digital emphasises consistent record-keeping, making it harder to overlook.

The quarterly reporting timeline requires ongoing attention to your bookkeeping all year.

Keeping your Making Tax Digital records up to date can minimise last-minute work, catch errors earlier, and simplify meeting each quarterly deadline.

Additionally, it provides a clearer overview of your business’s financial activity.

Rosemary Bookkeeping can help with your Making Tax Digital records

Knowing what records you need for Making Tax Digital is just the first step.

These records must also remain accurate, well-organised, and up to date.

Your local Rosemary Bookkeeper can help maintain your digital records, track income and expenses, reconcile accounts, spot missing information, and prepare your bookkeeping ahead of each MTD quarterly update.

Instead of viewing Making Tax Digital as four separate deadlines, ongoing bookkeeping helps you stay prepared year-round.

If you need help getting your Making Tax Digital records in order, find your nearest Rosemary Bookkeeper today.

A Bookkeeper’s Role in Making Tax Digital

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A bookkeeper’s role in Making Tax Digital is to ensure these records are accurate, organised, and up to date, enabling reliable financial inputs for each quarterly update.

Making Tax Digital for Income Tax requires in-scope sole traders and landlords to maintain digital records and report data to HMRC regularly.

From tracking income and expenses to reconciling accounts and preparing the necessary reports, consistent bookkeeping helps simplify managing Making Tax Digital.

What is a bookkeeper’s role in Making Tax Digital?

A bookkeeper’s role in Making Tax Digital involves managing the financial records that underpin your MTD obligations.

They can assist you with:

  • Record income and expenses accurately
  • Maintain digital bookkeeping records
  • Reconcile your bank accounts
  • Check transactions for errors
  • Identify missing or duplicate entries
  • Keep your bookkeeping up to date throughout each quarter
  • Prepare records for MTD quarterly updates
  • Work alongside your accountant where required

While Making Tax Digital could change how information is submitted to HMRC, accurate bookkeeping remains fundamental to the process.

Making Tax Digital starts with accurate bookkeeping

It’s simple to concentrate on meeting the four quarterly MTD deadlines.

But these updates rely heavily on data collected over the past three months.

If your bookkeeping is incomplete, inaccurate, or months behind, completing each quarterly report becomes significantly more challenging.

For instance, if your software indicates £18,500 in income for a quarter, but two customer payments are recorded twice, and several expenses are missing, the records won’t accurately represent your business activities.

A bookkeeper can review the transactions and help spot issues before the next MTD deadline.

Keeping your digital records up to date

Making Tax Digital for Income Tax requires digital record-keeping.

For a sole trader, this can include:

  • Sales and other business income
  • Business expenses
  • Customer invoices
  • Supplier costs
  • Payments received
  • Bank transactions

For landlords, records should include:

  • Property income
  • Pertinent expenses.

A crucial aspect of a bookkeeper’s role in Making Tax Digital is to keep these records updated consistently, preventing a backlog of months of transactions.

This approach integrates quarterly reporting seamlessly into your regular bookkeeping activities.

Checking transactions, not simply recording them

Modern bookkeeping software can automate much of the data entry process.

Bank feeds enable automatic transaction imports, while software can suggest appropriate categories.

Receipts can be digitised and stored electronically. However, automation alone does not ensure accuracy.

For instance, your software might automatically assign a £750 transaction to a category based on past purchases from the same supplier.

That does not necessarily mean the category is correct.

A bookkeeper can help:

  • Review automated transaction categories
  • Check unusual payments
  • Investigate missing information
  • Identify duplicate entries
  • Correct bookkeeping errors
  • Ask for clarification when a transaction is unclear

Technology can accelerate bookkeeping, but human oversight remains essential.

Reconciling your bank accounts

Bank reconciliation compares the transactions recorded in your bookkeeping software with those that appear in your bank account.

This can uncover:

  • Missing payments
  • Duplicate transactions
  • Unmatched customer invoices
  • Incorrect amounts
  • Payments allocated to the wrong invoice
  • Transactions that have not been recorded

Regular reconciliation ensures that your digital records accurately represent your business activities, which is especially crucial when these records are used for Making Tax Digital.

Preparing for quarterly MTD updates

Making Tax Digital for Income Tax requires quarterly updates throughout the tax year.

For those who entered MTD from 6 April 2026, the standard quarterly deadlines are:

  • 7 August
  • 7 November
  • 7 February
  • 7 May

The bookkeeper’s role in Making Tax Digital is particularly important between deadlines.

Instead of waiting for a quarterly update, your bookkeeper can continuously maintain your records throughout each three-month cycle.

As a result, much of the bookkeeping is already done by the time the next deadline approaches.

Can a bookkeeper submit your MTD quarterly updates?

A bookkeeper might assist with your quarterly MTD updates, depending on their services and the necessary HMRC authorisation.

HMRC permits multiple agents to support someone using Making Tax Digital.

For instance, a bookkeeper may keep your records and help with quarterly updates, while your accountant handles broader tax issues and the final tax return. Y

our bookkeeper does not need to replace your accountant; they can work together.

Bookkeeper vs accountant under Making Tax Digital

Making Tax Digital can make the relationship between your bookkeeper and your accountant even more important.

Your bookkeeper may help with:

  • Recording day-to-day transactions
  • Maintaining digital records
  • Bank reconciliation
  • Checking bookkeeping accuracy
  • Managing invoices and payments
  • Preparing records for quarterly updates
  • Regular bookkeeping throughout the year

Your accountant may help with:

  • Tax adjustments
  • Allowances
  • Tax calculations
  • Other taxable income
  • Tax planning
  • Final tax reporting

Accurate bookkeeping gives your accountant reliable information to work with.

What happens between MTD quarterly updates?

Submitting a quarterly update doesn’t mean you can pause your bookkeeping for three more months.

The next quarter begins immediately.

Your business continues to:

  • Make sales
  • Receive payments
  • Pay suppliers
  • Incur expenses
  • Send invoices
  • Receive bills

All of these transactions still require recording.

Regular bookkeeping distributes the workload throughout the quarter and lowers the last-minute burden before deadlines.

What if your bookkeeping has fallen behind?

If your bookkeeping is overdue, a bookkeeper can assist in updating your records.

You may need to:

  • Find missing invoices and receipts
  • Record outstanding transactions
  • Reconcile your bank accounts
  • Correct errors
  • Review income and expenses
  • Move records into suitable digital software
  • Prepare for your next MTD update

Delaying bookkeeping until the next deadline doesn’t lessen the workload; it simply provides less time to complete it.

Why regular bookkeeping works well with Making Tax Digital

Making Tax Digital promotes more consistent financial record-keeping.

Doing bookkeeping monthly can help detect problems early, before each quarter ends, such as:

  • Missing invoices
  • Outstanding customer payments
  • Duplicate transactions
  • Incorrect categories
  • Missing expenses
  • Unusual transactions
  • Bank reconciliation differences

This is a crucial aspect of a bookkeeper’s role in Making Tax Digital.

Their presence isn’t limited to when an MTD deadline approaches; they can help keep records up to date throughout the year.

Why choose Rosemary Bookkeeping for Making Tax Digital?

Making Tax Digital relies on accurate, current digital records. Rosemary Bookkeeping can assist with this.

Your local Rosemary Bookkeeper can support you with:

  • Regular digital bookkeeping
  • Recording income and expenses
  • Bank reconciliation
  • Maintaining accurate financial records
  • Catching up overdue bookkeeping
  • Bookkeeping software
  • Preparing records for MTD quarterly updates
  • Working alongside your accountant

A bookkeeper’s role in Making Tax Digital is to ensure that the underlying data for your reports is accurately maintained.

While software can submit the figures, solid bookkeeping ensures those figures come from accurate records.

If Making Tax Digital affects you, or if you’re preparing to start using MTD as your income approaches the thresholds, it’s now essential to incorporate regular bookkeeping into your routine.

Find your nearest Rosemary Bookkeeper today.

Back to Basics: What is Making Tax Digital?

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Making Tax Digital has changed the way many sole traders and landlords keep financial records and report information to HMRC.

If you have heard about MTD but are still unsure what it actually means for your business, this Back to Basics guide covers the essentials.

What is Making Tax Digital?

Making Tax Digital (MTD) is a system HMRC implemented to transition tax record-keeping and reporting into a digital format.

For individuals required to comply with Making Tax Digital for Income Tax, they must maintain digital records of their self-employment or property income and expenses.

They must use compatible software to send quarterly updates to HMRC and submit their tax return through this software by the end of the tax year.

MTD has already been established for VAT, and since April 6, 2026, it has also become mandatory for the first group of sole traders and landlords under MTD for Income Tax.

Who needs to comply with Making Tax Digital?

Making Tax Digital for Income Tax is being implemented based on qualifying income.

You must comply with MTD if you’re registered for Self Assessment, earn income from self-employment or property, and your qualifying income surpasses the threshold for that year.

The current schedule is as follows:

From 6 April 2026

You should already be using Making Tax Digital if your qualifying income was more than £50,000 in the 2024/25 tax year.

From 6 April 2027

You will need to use Making Tax Digital if your qualifying income was more than £30,000 in the 2025/26 tax year.

From 6 April 2028

You will need to use Making Tax Digital if your qualifying income was more than £20,000 in the 2026/27 tax year.

Partnerships are anticipated to be included in Making Tax Digital for Income Tax in the future, although HMRC has not yet provided a confirmed timetable.

What does Making Tax Digital mean in practice?

Making Tax Digital transforms bookkeeping from a task mostly handled around the Self Assessment deadline into a more consistent, ongoing process.

If MTD for Income Tax applies to you, you need to:

  • Keep digital records of your business or property income and expenses.
  • Use software that works with Making Tax Digital for Income Tax.
  • Send quarterly updates to HMRC.
  • Keep your bookkeeping up to date throughout the year.
  • Submit your tax return through compatible software after the tax year ends.

Your quarterly updates are summaries based on the digital records stored in your software.

This highlights the importance of regular bookkeeping.

Waiting until the deadline to compile receipts, invoices, and transactions from past months can make it much more challenging to meet your MTD obligations than it needs to be.

What does qualifying income mean?

Understanding whether Making Tax Digital applies to you depends on your qualifying income.

This income includes your total gross earnings from self-employment and property before deducting expenses and tax.

If you have multiple sources, consider them together.

For example, if you earn £38,000 from self-employment and £15,000 from rental income, your total qualifying income is £53,000.

The key factor is the combined qualifying income, not each source individually.

What are the Making Tax Digital quarterly deadlines?

For those who entered Making Tax Digital on 6 April 2026, the quarterly deadlines are:

  • 7th August 2026
  • 7th November 2026
  • 7th February 2027
  • 7th May 2027

The initial deadline of 7 August 2026 has now passed, and the next Making Tax Digital (MTD) deadline is 7 November 2026.

If you were supposed to start MTD in April but missed the first quarterly update, do not wait until November; HMRC still expects that overdue update.

After completing your quarterly updates, you will need to submit your tax return, which for the 2026/27 tax year is due by 31 January 2028. Remember, quarterly updates do not replace the annual tax return.

Why do you need to be MTD compliant?

If Making Tax Digital applies to you, following the rules is a legal obligation.

However, compliance requires more than just submitting reports four times a year.

Your bookkeeping must reliably support these submissions by accurately recording your income and expenses, keeping digital records current, and ensuring your software contains precise data.

Submitting incorrect information more often doesn’t improve accuracy. That’s why establishing the correct bookkeeping process is essential.

What happens if you miss an MTD deadline?

HMRC has added some flexibility for the first year of Making Tax Digital for Income Tax.

For the 2026/27 tax year, HMRC won’t issue penalties for late quarterly updates.

Nonetheless, submitting quarterly updates remains mandatory, and you must complete any overdue updates before filing your tax return.

Penalties can still apply for late tax submissions and payments.

After the initial year, the standard points-based penalty system for late updates comes into effect. Four points can result in a £200 fine, and additional missed deadlines at the threshold can trigger extra penalties of the same amount.

Therefore, the first year is best used to develop a consistent bookkeeping routine rather than assuming no penalty points will be issued.

What does keeping digital records actually mean?

Making Tax Digital requires keeping digital records of your relevant business income and expenses using compatible software.

These records may include:

  • Income received
  • Business expenses
  • Invoices
  • Receipts
  • Bank transactions
  • Property income and costs when applicable.

The goal is to create a digital record that your MTD software can use to generate the figures needed for your quarterly updates.

Digital record-keeping isn’t just about transferring paper records and inputting totals into HMRC every three months; your bookkeeping must be integrated into this digital process.

What software can you use for Making Tax Digital?

HMRC does not offer its own Making Tax Digital for Income Tax software.

Instead, you must choose commercial software recognised by HMRC.

You can use the online software finder to verify which products fit your needs. Recognised providers offering Making Tax Digital for Income Tax solutions include well-known names:

  • Xero
  • QuickBooks
  • Sage
  • FreeAgent

This is not a complete list.

HMRC does not favour any specific software provider.

Instead, HMRC advises using its software finder to ensure your selected software supports your income sources and needs.

This is especially important because various software options offer different features.

The ideal software isn’t always the one with the most functions, but the one that fits your business and how you and your bookkeeper handle records.

Can you still use spreadsheets for Making Tax Digital?

Potentially, yes.

Using Making Tax Digital doesn’t mean you must abandon spreadsheets.

HMRC states that users can continue to use spreadsheets, but they may need compatible bridging software to transfer data from the spreadsheet for MTD submission.

You still need to comply with digital record-keeping requirements.

Before sticking with your current spreadsheet system, it’s advisable to assess whether it will simplify or complicate your MTD process.

Do you need to sign up for Making Tax Digital?

Yes, if Making Tax Digital for Income Tax is mandatory for you, you must complete the MTD registration process.

Simply being registered for Self Assessment does not automatically set up everything for MTD.

HMRC recommends that affected taxpayers verify whether MTD applies, obtain compatible software, and sign up for Making Tax Digital for Income Tax before using the system.

Your software must also be connected to HMRC.

Is anyone exempt from Making Tax Digital?

Certain individuals can request an exemption from Making Tax Digital.

HMRC acknowledges situations where a person might be digitally excluded, such as due to age, disability, location, or other valid reasons that make digital tools impractical or unreasonable for them.

An exemption is not granted solely because someone prefers to keep paper records. If you think you might qualify, it’s advisable to review HMRC’s latest exemption guidance before concluding that MTD does not apply to you.

Why choose Rosemary Bookkeeping for Making Tax Digital?

Making Tax Digital emphasises the importance of consistent bookkeeping for compliance.

Purchasing MTD software is just one step; the accuracy and currency of the data entered are equally vital.

Your local Rosemary Bookkeeper can assist with the practical aspects of Making Tax Digital, such as maintaining digital records, tracking income and expenses, reconciling accounts, and preparing for quarterly deadlines.

We can also help you select appropriate bookkeeping software based on your needs and simplify the transition to digital record-keeping.

Rather than letting transactions pile up until the next MTD deadline, regular professional bookkeeping keeps your records organised year-round. This approach integrates each quarterly update into your routine, making it less of a stressful, last-minute task.

Making Tax Digital starts with good bookkeeping

Making Tax Digital may involve digital processes, but its core principle remains unchanged: accurate record-keeping is essential.

Software can store data and relay updates to HMRC, but the quality of your bookkeeping directly influences the accuracy of the information submitted.

If Making Tax Digital already applies to you, or you’ll be affected when thresholds are reached in 2027 or 2028, now is the perfect time to ensure your bookkeeping is prepared.

Find your nearest Rosemary Bookkeeper today.