Making Tax Digital
Making Tax Digital is HMRC's initiative to digitise tax reporting, affecting businesses across the UK. Understanding MTD is crucial as non-compliance can lead to penalties, but with the right approach, it can streamline your tax processes.
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How Making Tax Digital Works
MTD requires businesses to keep digital records and use compatible software to submit tax returns to HMRC. It started with VAT for registered businesses and is expanding to other taxes like Income Tax.
If you're VAT-registered with turnover above the threshold, you must use MTD-compatible software for VAT returns. This applies to limited companies, sole traders, and partnerships, aiming to reduce errors and improve efficiency.
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Key MTD Requirements and What You Need to Do
To comply with Making Tax Digital, here are the essential steps and rules you must follow for VAT and upcoming changes:
VAT-registered businesses with taxable turnover above £85,000 must use MTD for VAT submissions.
You need MTD-compatible software like Xero, QuickBooks, or Sage to submit returns directly to HMRC.
Digital records must be kept for all sales and purchases, including invoices and receipts.
Submit VAT returns quarterly through the software, not via the old HMRC online portal.
MTD for Income Tax is coming for self-employed individuals and landlords with income over £50,000 from April 2026.
For corporation tax, MTD is expected in the future, so plan early to avoid last-minute stress.
Exemptions exist for businesses that cannot use digital tools due to age, disability, or remoteness—apply to HMRC if eligible.
Penalties apply for late submission or non-compliance, with a points-based system for repeated issues.
Your software must be capable of keeping digital records and submitting returns without manual intervention.
Regularly update software and back up data to ensure smooth submissions and avoid technical glitches.
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Common MTD Mistakes and When to Seek Expert Help
A common mistake is not updating software or missing deadlines, which can lead to penalties. Also, some businesses try to manage MTD manually, but HMRC requires specific digital tools—this can cause compliance issues.
If you're unsure about software compatibility, have complex transactions, or need help with the transition, professional support can ensure smooth compliance. DG Accountancy Ltd offers fixed monthly packages with fast response times to help you meet MTD requirements confidently across Torquay and the UK.
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Let's Connect
Get In Touch With Us
You can reach us by phone, email, or using the contact form below. We'll get back to you quickly to discuss how we can help with compliance, tax planning, or business growth.
Initial chats are always free and without obligation. We'll listen to your goals, explain our fixed monthly packages, and show you how we can save you tax and improve cash flow. It's all about making your financial life easier.
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DG Accountancy Ltd provides fixed monthly accountancy services for small businesses and contractors in Torquay and across the UK. Contact us for reliable support to help your business thrive.
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