Making Tax Digital (MTD) is transforming how tax is managed, aiming to provide smoother records, saved time, and clearer insights for both the taxpayer and HMRC. This step-by-step guide shows you the key steps to get MTD ready and stay compliant. 

A simple guide to Making Tax Digital 

Step 1: Know whether MTD applies to you 
For the upcoming 2026/27 tax year, MTD for Income Tax will apply only to businesses and landlords with annual income over £50,000. In the following years, this will extend to include those with lower incomes; you can see the full breakdown here. 
 
Start by confirming whether you’ll be included in the next phase. Ask yourself: 

• Am I VAT registered? 

• Will the ITSA changes apply to my income? 

If you’re unsure, get in touch: we can help you check. 
 

Step 2: Revisit how you keep records 
MTD requires you to maintain fully digital, up-to-date records, so it’s important to assess your current bookkeeping setup. If you’re still relying on paper files and manual logs, now is the ideal time to transition to a digital accounting system.  
 

Step 3: Select an MTD-compatible software 
Submissions must be made through HMRC approved software. When comparing options, look for MTD recognition on HMRC’s website, and features that match your business needs. 

Cloud-based tools like Xero are popular for their flexibility, ease of access, and integrations with other business apps. You can find more information on our partnership with Xero here. 
 

Step 4: Ensure your systems are digitally linked 
If you currently use multiple tools, or systems for your bookkeeping, they must connect digitally. Copying and pasting information is no longer an option. Setting up the correct links ensures smooth data flow. 
 

Step 5: Prepare your team 
Anyone involved in your bookkeeping needs to understand how to keep digital records properly and how to use your chosen software. Taking the time to get some training now will make everything run more smoothly in the future. 
 

Step 6: Test everything before MTD goes live 
Run a trial process ahead of your first submission to identify any issues you may encounter. Ensure that your records transfer smoothly into the new system and that your software connects to HMRC without any errors. 
 

Step 7: Keep up to date 
As a new process, MTD rules and timelines will continue to evolve with time. 
Be on the lookout for any further HMRC announcements, and deadlines for ITSA and Corporation Tax. 

What’s next? 

As MTD continues to reshape the way taxes are recorded and reported, now is the perfect time to get ahead and set yourself up for a smooth transition. By understanding the rules and preparing early, you’ll not only stay compliant, but also benefit from clearer records and more efficient financial management.  

For further information, you can read more about MTD here.

If you’re ready to take the next step and need further assistance, get in touch with our Making Tax digital champions today.