Mtd latest update

Making Tax Digital (MTD) has been a significant change for UK businesses and self-employed individuals since its introduction. As we move through the 2024/25 tax year, it’s worth revisiting what’s currently required, what’s changing, and how you can stay compliant without unnecessary stress. Here at Severn Accounting, we’ve helped many Worcester-based businesses navigate MTD requirements, and we want to make sure you’re clear on where things stand.

What is Making Tax Digital and who needs to comply?

Making Tax Digital is HMRC’s initiative to bring tax record-keeping and reporting into the digital age. In essence, it requires businesses and self-employed individuals above certain thresholds to use software to keep their records and file their tax returns.

The key threshold is £85,000 turnover for VAT purposes. If you’re VAT-registered, MTD for VAT has been mandatory since April 2019. For income tax self-assessment, the scope expanded significantly. Since 6 April 2024, self-employed individuals and landlords with turnover exceeding £10,000 per annum must use MTD-compliant software to record their income and expenses, then file quarterly updates to HMRC. This represents a notable expansion from the previous £85,000 threshold for income tax MTD.

Even if you’re below these thresholds, you may voluntarily choose to use MTD software, and doing so can streamline your record-keeping.

Recent updates for the 2024/25 tax year

The recent changes have primarily focused on bringing more self-employed people into the MTD regime. The £10,000 threshold applies to the 2024/25 tax year onwards, making a significant portion of the self-employed population subject to quarterly reporting obligations.

Another important update relates to digital records. HMRC expects all records — invoices, receipts, bank statements — to be kept in digital form where possible. If you receive paper invoices, you’re expected to digitise them. This doesn’t necessarily mean expensive scanning; simple photographs of receipts taken on a mobile phone are acceptable if they’re clear and legible.

Additionally, HMRC continues to refine guidance on what constitutes adequate record-keeping. Spreadsheets alone are no longer sufficient; you’ll need to use MTD-compatible software. There’s a wide range of affordable options available, from basic packages costing just a few pounds per month to comprehensive solutions integrated with accounting software.

Which software should you choose?

HMRC publishes an approved list of MTD-compatible software providers on its website. The choice largely depends on your business complexity and budget. For simple sole traders with straightforward finances, basic accounting apps might suffice. If you’re running a more complex operation or managing multiple income streams, integrated software that handles invoicing, expense tracking, and tax calculations may be more appropriate.

Many accountants, including our team here at Severn Accounting, can recommend software that integrates well with our own systems, making year-end reconciliation and tax return preparation more efficient. Some software even integrates directly with your bank, automatically importing transactions — a real time-saver.

Regardless of which software you select, ensure it’s on HMRC’s approved list and that it meets your specific business needs. Don’t simply opt for the cheapest option; consider usability and support, as you’ll be using it regularly.

Planning ahead: quarterly reporting and record-keeping

One of the biggest adjustments for newly compliant taxpayers is the shift to quarterly reporting. Instead of tallying everything up once a year, you’ll need to submit summary updates to HMRC every quarter, plus a final declaration by 31 January following the end of the tax year.

This might seem burdensome, but it has genuine benefits: it keeps HMRC informed throughout the year, reduces surprises come January, and helps identify issues early. From a record-keeping perspective, it encourages better habits — you’re reviewing your finances four times a year rather than once.

To ease the transition, start implementing MTD now if you haven’t already. Choose your software, digitise your records, and get comfortable with the quarterly rhythm. Many people find that once they’ve completed their first quarter, subsequent updates feel straightforward.

Getting help and staying compliant

MTD compliance needn’t be a burden if you’re properly prepared and supported. At Severn Accounting, we regularly guide clients through MTD requirements, help them select suitable software, and review their quarterly submissions to ensure everything’s in order.

For tailored advice, contact Severn Accounting — we’re here to help.