Making Tax Digital Deadline Extended

Making Tax Digital (MTD) is a digital system for reporting income and expenses and submitting tax returns. Announced in the 2015 budget, MTD aimed to modernise the UK’s tax system.

This guide will cover everything you need to know about Making Tax Digital (MTD) in the UK.

Let’s get started!

What is Making Tax Digital?

Making Tax Digital (MTD) is an online system for recording and submitting taxes to HMRC. It transforms financial reporting by enabling more frequent, real-time updates, simplifying recordkeeping, and reducing errors.

Under MTD, you must use compatible software to keep digital records of income and expenses from self-employment or property income. Businesses submit quarterly summaries and annual tax returns to HMRC.

​Why MTD?

MTD aims to reduce paperwork, errors, and fraud, allowing businesses to better track their cash flow and position.

Digital tools and cloud accounting technology reduce data errors and improve efficiency. MTD aims to enhance government processes and taxpayer communication, and to minimise fraud and return delays.​

Making Tax Digital for VAT

MTD for VAT started for businesses above the threshold in 2019 and became mandatory for all VAT-registered businesses (regardless of turnover) from April 2022.

• How To Manage the Compulsory VAT Registration Requirements?
• Understand Value Added Tax & VAT Returns for Businesses

MTD for Income Tax Self Assessment (MTD or ITSA)

From 6 April 2026, sole traders and landlords with total gross income (self-employment or property) over £50,000 in a tax year will need to follow Making Tax Digital for Income Tax (MTD for ITSA).

If your income is between £30,000 and £50,000, you will need to join MTD for ITSA from 6 April 2027. MTD for ITSA will be further extended from 6 April 2028 to those earning over £20,000.

• Making Tax Digital Income Tax and Self-Assessment

MTD for Corporation Tax

Many people were expecting MTD for corporation tax after the implementation of MTD for ITSA.  However, the Transformation Roadmap published by HMRC in 2025 confirmed that it won’t introduce MTD for corporation tax.

How MTD Works?    

MTD for VAT is mandatory, but MTD for ITSA becomes mandatory for many people from April 2026. Landlords and business owners need to record and submit quarterly tax updates to HMRC via compatible software, replacing annual returns. It eases and improves tax administration by automating data submissions, reducing errors and improving efficiency.

Does MTD Apply to Me?

MTD for VAT is applicable to all VAT-registered businesses. They are required to file their VAT returns digitally. If you are not registered for VAT, you can voluntarily register and file your tax return digitally.

MTD for ITSA will apply to self-employed individuals and landlords earning over £50,000 from April 2026, over £30,000 from April 2027, and over £20,000 from April 2028.

• Comprehensive Guide to Self-Assessment
• Important Self-Assessment Tax Return Deadlines
• HMRC Self-Assessment Forms | A Complete Guide
• How Soon Should You File a Self-Assessment Tax Return?

How do I Register for MTD?

Here’s the simple process to register for MTD:

MTD for VAT

Before registering, ensure you have compatible accounting software. On the Government’s Making Tax Digital website, you’ll need:

• Your Government Gateway credentials
• your business’s VAT number
• a business email address

You might also be asked to provide:

• Your National Insurance Number as a sole trader
• Company registration number and Unique Taxpayer Reference (UTR) for corporation tax (limited companies)

After registering, wait for HMRC email confirmation before submitting data.

MTD for ITSA

To register for Making Tax Digital for Income Tax, you must be registered for Self Assessment and have submitted a tax return in the last 2 years. Here’s the process to sign up for MTD for ITSA:

• Sign in to sign up for MTD ITSA.
• Confirm software and start date.
• Select the accounting period and permissions.
• Add income sources and business details.
• Final confirmation

• Making Tax Digital Income Tax and Self-Assessment

What is Making Tax Digital for Business?

Businesses subject to MTD must use compatible software for recordkeeping and submit quarterly digital records to HMRC. Most business software is already MTD-compliant.

At year-end, the declaration of data completeness and accuracy is also made via the digital system.

​Confused?

Stay ahead of HMRC deadlines and avoid penalties.

Set up MTD, keep digital records, submit quarterly updates, and file your final tax return with our

Personal Tax Accountants

Benefits of Making Tax Digital

Here is the list of some of the common benefits of MTD:

• MTD offers efficiency and straightforwardness to better understand the financial position of your business
• HMRC-recognised MTD software saves time and money while keeping digital records and preparing submissions.
• MTD-compatible software can reduce avoidable mistakes that slow down the tax reporting process.
• Digital systems automate tax return calculations and submissions, reducing the risk of manual errors.
• Real-time access to the tax information of a taxpayer.

Drawbacks of Making Tax Digital

There are some challenges to making tax digital:

• Implementing digital software can be expensive, especially for small businesses.
• Learning new software can be another challenge, and businesses need to train their staff to comply with MTD regulations.
• It’ll take time and effort to shift from manual systems to the MTD.
• Digital systems can be easily vulnerable to breaches that compromise data security and privacy. Needs additional cybersecurity measures and investment.

What Digital Records do I Need to Keep for MTD?

Digital records are electronic records created with online accounting software and stored and viewed on devices such as smartphones. For VAT, these are the digital records you need to keep:

• Name, address and contact details of a business
• VAT registration number
• Details of VAT accounting schemes
• Amount of VAT charged and received
• Adjustments made on returns
• Time and date of transaction

For MTD ITSA, you must keep digital records of self-employed and property income and expenses using HMRC-recognised compatible software. These are the records required for MTD ITSA:

• Income (with amount, category and date)\
• Expenses (with amount, category and date)
• Supporting details  (explanation of each transaction)

These must be stored digitally, updated regularly and used to submit quarterly updates to HMRC.  

What Accounting Software Should I Use for MTD?

Since it is now mandatory to use MTD-compatible software for real-time tax reporting, businesses can better understand their tax liabilities and manage cash flow. Digital systems help improve the speed and accuracy, and enhance the overall taxpayer experience. 

Top MTD Accounting Software options include:

• Xero
• QuickBooks
• FreeAgent
• Sage Online
• Hammock

• Top 8 Cloud Accounting Software For Small Businesses

Conclusion

Making Tax Digital (MTD) is a great initiative by HMRC to modernise the UK’s tax system. It is highly efficient and effective to keep records digitally and to use real-time reporting. Introduced with MTD for VAT in 2019, it now extends to Income Tax Self Assessment (MTD ITSA). It has promoted accuracy, reduced errors, and improved visibility into tax liabilities.

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