What Making Tax Digital actually means

Making Tax Digital, or MTD, is HMRC's move to digitalise the UK tax system. In practice that means two things change: you keep your records digitally instead of on paper or in a standalone spreadsheet, and you submit your tax figures to HMRC through approved software rather than typing numbers into an online form once a year. It's less of a one-off filing event and more of an ongoing digital process — your software talks to HMRC on a regular basis instead of you doing a single annual data-entry exercise.

It's worth being clear about what MTD isn't. It isn't a new tax. It isn't a change to how much you owe. It's a change to how you record and report the numbers you were already going to report anyway.

The dates and thresholds you need to know

MTD is being rolled out in phases, and it already covers more businesses than a lot of owners realise:

  • VAT-registered businesses — MTD has applied since April 2022. If you're VAT registered, you should already be keeping digital VAT records and filing through compatible software.
  • Landlords and sole traders earning over £50,000 — MTD for Income Tax applies from April 2026.
  • Landlords and sole traders earning over £30,000 — MTD for Income Tax applies from April 2027.

If your income sits below these thresholds today, don't assume it stays that way. HMRC has been steadily lowering the bar over time, and it's a reasonable bet that MTD keeps expanding to cover more sole traders and landlords in the years ahead. Getting comfortable with digital record-keeping now, before it's compulsory, means one less thing to scramble around when your date arrives.

What changes for your record-keeping

The biggest practical shift is that a shoebox of receipts, or a spreadsheet you update once a quarter, stops being enough on its own. Under MTD you need to:

  • Keep your business records in a digital format, in software HMRC recognises as MTD-compatible.
  • Record transactions as they happen, or close to it, rather than reconstructing months of activity from memory at year-end.
  • Submit updates to HMRC through that software — for VAT, this means quarterly returns; for Income Tax, it means quarterly updates plus an end-of-period statement and a final declaration.
  • Keep a digital trail that links your original records to what you actually submitted, so there's a clean audit path if HMRC ever asks.

None of this needs to be complicated. It mostly means moving from "I'll sort the books out at the end of the year" to "the books are more or less sorted as I go" — which, in practice, tends to make running the business easier as well as keeping HMRC happy.

A simple MTD readiness checklist

Work through this list, and you're in a strong position whichever MTD phase applies to you:

  • Confirm which MTD phase applies to you, and from what date — VAT now, or Income Tax from 2026 or 2027 based on your income.
  • Check whether your current software is MTD-compatible, or whether you're still relying on spreadsheets or paper.
  • Set up digital bank feeds so transactions flow into your software automatically instead of being entered by hand.
  • Get into the habit of recording income and expenses weekly rather than in a big batch at the end of the quarter.
  • Start capturing receipts digitally — a photo through your accounting app beats a drawer full of paper.
  • Know your quarterly submission dates and put reminders in ahead of time, not on the day.
  • Talk to your accountant about who's actually doing the submissions — you, or them — so nothing falls between the two of you.

How FreeAgent handles it

Every Buzz package includes FreeAgent as standard, and it's HMRC-approved for MTD compliance. That means digital VAT and Income Tax returns are built in from the start, income and expenses are tracked in real time rather than reconstructed later, bank feeds pull transactions in automatically, receipts can be captured on your phone, and your accountant can support submissions directly through the same software you're already using. Because it's included in every plan, it also saves clients up to £330 a year compared with buying equivalent software separately.

The result is that MTD stops being a looming deadline and becomes something that just happens quietly in the background, month by month, because the software and the habits are already in place.

What to do next

If you're VAT registered, you should already be MTD-compliant — if you're not sure whether you are, that's worth checking urgently. If you're a sole trader or landlord approaching the £50,000 or £30,000 thresholds, the sensible move is to get your digital record-keeping sorted well before your date lands, not the week before. Have a look at how Buzz handles MTD, or book a free discovery call and we'll talk you through exactly what needs to happen for your business.