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Making Tax Digital: what it means for your business

Digital records and quarterly updates are extending to more taxpayers. Preparing early makes it a non-event.

11 November 2025 · 5 min read · Bruce Thomas

Cloud accounting software being used on a laptop

Making Tax Digital requires businesses to keep records digitally and to submit information to HMRC using compatible software, with digital links throughout rather than manual re-keying.

Where it already applies

VAT-registered businesses keep digital VAT records and file returns through compatible software. Copying figures into a portal by hand, or maintaining a paper purchase ledger, does not meet the requirement.

Income Tax

MTD for Income Tax extends the same principles to self-employed people and landlords above set income thresholds, with quarterly updates during the year and a final declaration afterwards. Thresholds and start dates have been phased, so the date that applies to you depends on your income level.

We tell clients well in advance which phase they fall into and get the records in shape ahead of time.

What 'digital links' means

  • Data must flow between systems without manual re-typing
  • A linked spreadsheet with bridging software can be acceptable
  • Copying and pasting between files generally is not
  • The audit trail from source record to submission must be intact

Getting ready

In practice this means moving to cloud bookkeeping, connecting bank feeds and using receipt capture. Most businesses that make the change find that the compliance requirement was the smaller benefit — knowing where they stand month to month was the larger one.

This article is general guidance for business owners in the UK and does not amount to advice for your particular circumstances. Tax rules change and the right answer depends on your figures — please take specific advice before acting.

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