Let our Experts answer your Making Tax Digital FAQs

As the UK government continues to modernise the tax system, Making Tax Digital (MTD) has become a critical initiative for businesses and individuals alike. MTD aims to make the tax process more efficient, effective, and easier for taxpayers by requiring digital record-keeping and the submission of tax returns through compatible software. While this transition promises long-term benefits, it also brings with it a host of questions and potential challenges.

Whether you’re a business owner, accountant, or individual taxpayer, navigating the complexities of MTD can be daunting. To help you better understand what MTD means for you and how to comply with its requirements, we’ve compiled a comprehensive list of Frequently Asked Questions (FAQs). Our team of experts has carefully answered these questions to provide you with clear, accurate, and practical guidance.

Below, you’ll find answers to the most common queries regarding MTD, ranging from eligibility and compliance to software choices and deadlines. We hope this resource will equip you with the knowledge you need to seamlessly transition to the digital tax system and stay compliant with HMRC’s latest regulations.

Explore our FAQs below to get expert insights on Making Tax Digital and ensure your tax affairs are up to date and compliant.

MTD is a government initiative aimed at transforming the UK tax system by making it easier for individuals and businesses to keep on top of their tax affairs.

MTD is mandatory for VAT-registered businesses with a taxable turnover above the VAT threshold. It will eventually be extended to all businesses and landlords.

    • MTD for VAT became mandatory on 1st April 2019 for most VAT-registered businesses. From April 2022, it applies to all VAT-registered businesses, regardless of turnover.

Businesses must keep digital records and submit VAT returns using MTD-compatible software.

You need MTD-compatible software that can maintain digital records and communicate directly with HMRC’s systems to submit VAT returns.

Yes, but they must be used in conjunction with MTD-compatible software to submit VAT returns.

You need to register for MTD through the HMRC website and ensure your software is ready to submit your VAT returns.

Non-compliance could result in penalties, including fines and surcharges from HMRC.

Yes, exemptions may apply for reasons of age, disability, or remoteness of location, among other factors. You can apply for exemption through HMRC.

If you are VAT registered, you must submit VAT returns quarterly as usual, but through MTD-compatible software.

MTD helps reduce errors, improve efficiency in tax reporting, and gives businesses a clearer view of their tax position.

Costs may include purchasing MTD-compatible software and potentially upgrading your current systems.

MTD for income tax is being phased in. From April 2026, it will be mandatory for self-employed individuals and landlords with income over a certain threshold.

Yes, your accountant can manage your MTD submissions, but you must ensure they are using MTD-compatible software.

HMRC provides a list of MTD-compatible software on their website. Many accounting software providers offer MTD-ready solutions.

No, manual submissions are not permitted under MTD. You must use MTD-compatible software to submit your VAT returns.

You should correct the error using your MTD software and resubmit, or notify HMRC if the error is significant.

You need to keep records of all sales, purchases, and VAT you owe or reclaim in a digital format.

Complex VAT arrangements may require more sophisticated MTD-compatible software. Consulting with an accountant may be beneficial.

Yes, MTD will eventually cover all taxes, including corporation tax and income tax, in the coming years.

The soft landing period refers to the initial period after MTD is introduced, during which HMRC is more lenient with penalties for businesses struggling to comply, particularly regarding digital links between software.

Yes, if a charity is VAT-registered and meets the taxable turnover threshold, it must comply with MTD. However, some charity-specific exemptions may apply.

Your business is VAT registered if your taxable turnover exceeds the VAT threshold, currently set at £85,000, and you have registered with HMRC for VAT.

Yes, businesses with a taxable turnover below the VAT threshold can opt into MTD voluntarily to benefit from digital record-keeping and submission.

Late submissions may result in penalties from HMRC. However, during the soft landing period, HMRC may offer some leniency, especially if you are working towards compliance.

Each VAT registration must comply with MTD independently, which may require separate digital records and submissions for each registration.

A digital link is an electronic or software-based connection between pieces of software that transfers data directly without manual intervention. It is required under MTD to ensure accurate and secure data transfer.

Businesses using the VAT flat rate scheme must still comply with MTD for digital record-keeping and submissions, but the calculation of VAT due under the flat rate scheme remains unchanged.

Start by ensuring you have MTD-compatible software, train your staff, review your VAT records for accuracy, and seek professional advice if needed to ensure compliance by the deadlines.

HMRC offers guidance and support, including webinars and helplines. Additionally, many accountants and software providers offer assistance to help businesses comply with MTD requirements.

How LT Accounting Can Help You Navigate Making Tax Digital (MTD)

At LT Accounting, we understand that the transition to Making Tax Digital (MTD) can be challenging, whether you’re running a small business, managing a larger enterprise, or handling your personal tax affairs. The new digital requirements can seem overwhelming, but with the right guidance and support, they can also present an opportunity to streamline your processes and enhance your financial management.

Our team of experienced accountants is well-versed in all aspects of MTD and is here to help you every step of the way. Here’s how LT Accounting can assist you in ensuring a smooth and compliant transition:

  • Personalised MTD Strategy: We take the time to understand your specific circumstances and develop a tailored approach that aligns with your business needs and tax obligations.
  • Software Integration and Training: We can recommend and assist with the integration of HMRC-compliant software that suits your business operations. Additionally, we provide training to ensure you and your team are comfortable and proficient with the new systems.
  • Ongoing Compliance Support: MTD is not a one-time task but an ongoing requirement. Our team offers continuous support, ensuring your digital records are accurately maintained and your submissions are timely and compliant with the latest HMRC regulations.
  • Expert Tax Advice: Beyond MTD, our experts are available to provide comprehensive tax advice, helping you optimise your tax position and ensure you’re taking advantage of all available reliefs and allowances.
  • Peace of Mind: By partnering with LT Accounting, you can focus on what you do best—running your business—while we handle the complexities of digital tax compliance.

Transitioning to Making Tax Digital doesn’t have to be a daunting experience. With LT Accounting by your side, you can navigate these changes with confidence and ease. Contact us today to discuss how we can support you in your MTD journey and beyond.

Get in touch with our experts at LT Accounting to learn more about how we can assist you with Making Tax Digital and all your accounting needs.