What Does Making Tax Digital Actually Mean for Your Business?

From radio adverts to TV commercials, it’s hard to escape messaging around Making Tax Digital at the moment. The government-run financial initiative, also known as MTD, has been designed to improve efficiency for everyone from sole traders to large businesses. 

Keep reading to understand how you can remain compliant and avoid any late filing penalties.

What is Making Tax Digital?

You will likely have heard about Making Tax Digital as it was first launched in 2022 for VAT-registered companies. As of April 2026, this initiative is now mandatory for landlords and sole traders with a qualifying income of £50,000 from the 2024/25 tax year.

The initiative is designed to eliminate manual bookkeeping, requiring the use of digital accounting solutions instead of paper records. Another major change is that qualifying landlords and sole traders must submit quarterly tax updates as well as an end-of- year tax return. 

While the first phase for these individuals launched on 6th April 2026, the further phases will be released over the coming tax years. This means as of April 2027, anyone with an income over £30,000 is impacted, and anyone earning over £20,000 outside of PAYE is added to the initiative in April 2028.

Benefits of MTD

While MTD is designed to help HMRC manage taxes more efficiently, there are actually a number of benefits for businesses. These are as follows:

• Reduced Admin: Using digital record-keeping automates lots of previously manual processes. These software solutions also eliminate the need to store paper-based expenses, eliminating the chance of losing receipts. With granted permissions, software can also be accessed by your accountant, which also speeds up the reporting process.
• Real-Time View: The required quarterly updates mean businesses are provided with an ongoing running estimate of end-of-year tax obligations. This can help businesses ensure they are setting aside the right funds, allowing for better financial planning.
• Less Errors: A major issue with the current way of submitting taxes is that they are open to mistakes. MTD software minimises human error, especially when it comes to bookkeeping and making calculations. This greatly reduces the chance of penalties and fines.

How Will Making Tax Digital Impact Your Business?

MTD means your business must use recognised software and comply with the increased reporting requirements. These changes bring with them some new learning for businesses that don’t already manage these processes.

Another change, associated with increased updates, is that bookkeeping processes will need to change. While some businesses may monitor this process regularly, those who only manage bookkeeping occasionally will need to adapt their approach. In essence, every transaction must be digitally recorded and managed at all times.

Why Is It Ideal to Work With an Accountant When Navigating Making Tax Digital?

We understand that tax compliance can be complex when HMRC changes are implemented..

At Hysons, we are fully operational in alignment with MTD. Whether you’re a business that needs to submit company tax returns, or a sole-trader managing self-assessments, we have support for you.

Working with an accountant means you minimise the risk of errors, remain compliant with MTD from day one, correctly submit quarterly reports, and optimise tax planning. Contact our team to learn more.