What is Making Tax Digital?

Making Tax Digital (MTD) is an ongoing HMRC initiative to digitise the UK tax system. Its main goal, according to HMRC, is to “make tax administration more effective, more efficient and simpler for taxpayers”.

Under MTD, businesses and individuals are required to maintain accurate, updated digital records of their income and tax expenses and use MTD-compliant accounting software that can submit summaries to HMRC every quarter. The software will give businesses and individuals a reliable estimate of their tax liability, so they can budget to pay their tax bill, and not get caught out by a tax bill that’s far higher than expected.  

In 2019, the UK VAT system was the first to move to a digitised MTD system. VAT registered businesses and organisations with a turnover above the VAT threshold (£85,000 at the time) first had to report their VAT summary figures to HMRC every quarter. In April 2022, this was extended to all VAT-registered businesses and organisations. Next to be introduced is Making Tax Digital for Income Tax from April 2026.