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Making Tax Digital is changing: How you can get ready

Read time: 4 mins Date added: 10/04/2025

Making Tax Digital (MTD) has transformed tax management for many businesses. With significant updates planned for 2026 which will expand the scope to include Income Tax Self-Assessment (ITSA), this guide will help both accountants and businesses to get ready. We’ll also show how our free accounting software, Business Finance Assistant, can help with MTD compliance. 

On this page:​

Understanding MTD: who needs to comply?

You need to comply now if one of the following applies:

 

  • You’re VAT registered, whether your business is incorporated or not.
  • Your business has voluntarily registered for VAT.

 

Exemptions from MTD

Some companies and individuals may qualify for exemptions from MTD due to specific reasons such as:

  • Inability to use digital tools because of age or disability.
  • Difficulty accessing digital services in remote locations.
  • Religious beliefs that prevent the use of digital tools.
  • Roles such as trustees, including charitable trustees. 

 

Read the GOV.UK guidance on exemptions from MTD to understand whether they apply to you.

The scope of MTD is expanding

MTD is expanding from VAT to include Income Tax Self-Assessment (ITSA). 

From April 2026, landlords or self-employed workers with annual income over £50,000 must comply with MTD for Income Tax. From April 2027, this will expand to include those with incomes over £30,000.

A new points-based penalty system will soon take effect for late submissions and payments. Take time to familiarise yourself with the upcoming deadlines so you can avoid unnecessary fines and interest charges.

How accountants can prepare for the MTD changes

  • Identify which of your clients are affected. Remind your clients, especially landlords and sole traders, of the requirements and deadlines. 
  • Create an Agent Services Account (ASA). And register your clients for MTD for Income Tax. 
  • Train your team. Upskill your team to guide clients through the new compliance requirements and understanding the software options.
  • Review and update processes. Streamline your processes to make sure they’re compliant with MTD. Regularly review digital records for accuracy and correct any discrepancies promptly.
  • Prepare clients. Inform your clients about the changes and help them transition to digital record-keeping and submission if they haven’t already. Give them support and training as needed.
  • Plan ahead. Stay informed about future changes to MTD and adapt your business practices accordingly. This includes potential monthly VAT updates or extra reporting requirements

 

For further guidance, you can check out the GOV.UK step-by-step guidance on Making Tax Digital for Income as an agent and the HMRC Agent toolkit (PDF, 1.3KB).

How small businesses can prepare for the MTD changes

  • Understand the new requirements. Familiarise yourself with the latest MTD rules and deadlines. 
  • Select MTD compliant software. Start using HMRC approved accounting software that can maintain digital records and submit tax returns directly to HMRC.
  • Maintain digital records. Ensure all VAT-related transactions are recorded digitally. This includes sales invoices, receipts, purchase invoices, expenses and VAT calculations.
  • Review and update processes. Streamline your processes to ensure they are compliant with MTD. Regularly review digital records for accuracy and correct any errors promptly.
  • Plan ahead. Stay informed about future changes to MTD and adapt. This includes additional reporting requirements.

 

For further guidance, read the GOV.UK step-by-step guide for individuals on Making Tax Digital for Income.

How the right accounting software can support your MTD requirements

If you haven’t already, you’ll need to adopt MTD approved software to maintain digital records. Traditional manual methods, including data entry into HMRC’s portal won’t be an option.

Our Business Accounts come with free, HMRC approved accounting software called Business Finance Assistant. It’s designed to help you and your accountant better manage your finances and meet MTD requirements.

Use our accounting software to:

  • Allow access for your accountant and an unlimited number of users from the business 
  • Submit VAT returns digitally to HMRC
  • Bookkeep and stay on top of profit/loss
  • Create, issue and track professional looking quotes and invoices
  • Access customised reports to help manage cash flow

Stay on top of MTD compliance

Now’s the perfect time to get yourself and your business ready for the changes to MTD. First, understand the new rules. Next, choose the right MTD compliant software. Finally make sure you keep your digital records organised. 

Accountants - support and guide your clients through these changes. And businesses - simplify your processes and stay updated on what's coming next. Business Finance Assistant can help make MTD compliance easier and keep your finances in top shape. Take these steps today to help set your business up for success.

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While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Bank of Scotland for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.