Your MTD Path — What Making Tax Digital Means for Your Business
Making Tax Digital is rolling out in stages and the rules are different depending on your business type, turnover, and VAT status. This tool takes you through a short decision tree and tells you exactly what applies to you, when it kicks in, and what you need to do to prepare.
How to use
Answer 3 to 4 questions about your VAT status, business structure, and income level. The tool follows the branching logic of HMRC's MTD rules and gives you a personalised result with specific deadlines and action steps.
Understanding Your MTD Status
Making Tax Digital is HMRC's programme to move tax reporting from annual returns to digital, real-time submissions. MTD for VAT has been mandatory since April 2022 for all VAT-registered businesses. MTD for Income Tax Self Assessment is being phased in from April 2026 for sole traders and landlords with income above certain thresholds. MTD for Corporation Tax has been announced but not yet given a start date.
Frequently Asked Questions
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's programme requiring businesses to keep digital records using compatible software and submit tax information electronically. It replaces manual record-keeping and paper-based tax returns with digital submissions, giving HMRC real-time visibility of tax liabilities.
Do I need special software for MTD?
Yes. MTD requires software that connects to HMRC through their API. The main options are Xero, QuickBooks, Sage, and FreeAgent. Spreadsheets can be used with bridging software for VAT, but full digital record-keeping is the direction HMRC is moving. Manual filing through the HMRC portal is no longer compliant.
When does MTD for Income Tax start?
MTD for Income Tax Self Assessment starts in April 2026 for sole traders and landlords with gross income over 50,000 pounds. Those with income between 30,000 and 50,000 pounds follow from April 2027. Lower income thresholds are expected in future years but have not yet been confirmed.
What happens if I do not comply with MTD?
HMRC can issue penalties for late or incorrect digital submissions, similar to existing Self Assessment penalties. For MTD for VAT, non-compliance has been enforced since 2022. For MTD ITSA, HMRC has indicated a soft landing period, but penalties will apply once the grace period ends.
Does MTD apply to limited companies?
MTD for VAT applies to all VAT-registered businesses including limited companies. MTD for Income Tax does not apply to limited companies. MTD for Corporation Tax has been announced but no start date has been set. Company directors with personal self-employment or rental income may still be caught by MTD ITSA on that personal income.
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Book a Free Discovery Call© Imperial Consulting Limited, trading as Grosvenor.Solutions. Registered in England. This tool is for educational and illustrative purposes only. It does not constitute financial, tax, or legal advice. Consult a qualified professional for decisions affecting your business.