MTD - what does it mean for you and your business?

Making Tax Digital is coming. Don’t panic (yet).

If you’ve heard the words “Making Tax Digital” (MTD) and felt your stomach drop... you’re not alone.

We’ve had plenty of clients tell us, “I’ve heard about it but I’ve got no idea what it actually means.” And one who said it sounded like something you might need to go to a special clinic to get rid of.

Thankfully, it’s not some terrifying new tax (or disease!). It’s an initiative that’s being brought in to change how people keep financial records and submit information to HMRC.

So, I’m going to do my best to break it down for you. Minus the jargon. 

What is Making Tax Digital?

Making Tax Digital is HMRC’s plan to drag the tax system out of the 1990s and into, well, at least the 2010s.

The idea is fairly simple. They want everyone to:

• Ditch the paper.

• Record their business income and expenses digitally.

• Submit updates to HMRC every quarter using approved software.

MTD has actually been around since 2019 for VAT-registered businesses with over £85,000 turnover. But the next wave is for small self-employed businesses and landlords.

From April 2026, if your total turnover is over £50,000, you’ll be expected to join the MTD party. 

From April 2027, if you earn over £30,000, you’ll be invited too.

And, for small businesses with turnover under £20,000, you’ll be expected to join the fun from April 2028

So why the change? Because paper records, Excel spreadsheets and random piles of receipts in carrier bags don’t mix well with accurate tax returns. (Can’t say I disagree so far!)

What does it mean for your business?

Here’s the honest version: MTD is meant to make life easier for everyone in the long run. But in the short term, yes, it means a few changes to how you work and that can be annoying. 

You’ll need to:

• Keep your records digitally.

• Submit quarterly updates in addition to once a year.

• Get set up with software that ‘talks’ to HMRC.

Starting early is the best way to avoid any end-of-year chaos. We don’t recommend leaving it to the last minute.

Also, a heads up: HMRC’s late submission penalties are going up in April 2025. The fines are changing from 2–4% to 3–10% of what you owe. Not life-ending exactly, but definitely in “I wish I’d got this sorted sooner” territory.

What tools can help you?

The good news is that accounting and book-keeping software has come a LONG way. At Evolve, we recommend Xero to our clients because it’s simple, intuitive, and plays nicely with HMRC’s systems.

Plus, when you get Xero, you also get free access to Hubdoc, a clever little tool that lets you scan, photograph or forward receipts and bills directly into your books. It’s as close as you can get to “set and forget” for paperwork.

Does it mean you’ll never have to think about tax again? Sadly no. But does it make record-keeping about a thousand times less faffy? Absolutely.

What next?

If you’re thinking “Right, but what do I actually need to do now?”, there’s more good news: this is a process, not an overnight change.

Start small:

• Start scanning receipts and keeping records digitally.

• Chat to your accountant (hi there) about software. (It’s Xero every time for us.)

• Don’t panic. A bit of early prep now will save you hours of stress later.

• Don’t feel like you have to work this all out on your own. Speak to your accountant (or me if you don’t already have one).

👉 Are you already preparing for MTD? Or still quietly ignoring it and hoping it goes away? Either way, drop me a message — or book a free chat.

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