Making Tax Digital (MTD) continues to reshape how businesses, landlords, and self-employed individuals keep records and report tax to HMRC. While MTD for VAT is now fully established, MTD for Income Tax Self Assessment (MTD for ITSA) is now being phased in for landlords and self-employed individuals over the coming years.
This guide explains the current MTD rules, rollout phases, practical requirements, and the steps businesses and landlords should take now to remain compliant and avoid disruption.
1. What Is Making Tax Digital?
Making Tax Digital is HMRC’s long-term programme to modernise the UK tax system. The aim is to move businesses and individuals away from manual record keeping and toward a more digital tax environment.
The key objectives include:
- Digital record keeping
- More accurate reporting
- Fewer manual errors
- Improved tax visibility
- Streamlined submissions through approved software
MTD is being introduced gradually across different taxes:
- MTD for VAT — already mandatory
- MTD for Income Tax (MTD for ITSA) — phased rollout now underway
- MTD for Corporation Tax — still under consultation
Each phase increases the importance of digital bookkeeping, cloud accounting software, and maintaining organised financial records throughout the year.
2. MTD for VAT — Where We Are Now
Making Tax Digital for VAT is mandatory for all VAT-registered businesses, regardless of turnover.
Businesses must now:
- Keep VAT records digitally
- Use HMRC-compatible software
- Submit VAT returns through approved digital systems
- Maintain digital links between records and submissions
While many businesses are technically compliant, a large number still rely heavily on spreadsheets, fragmented bookkeeping systems, or manual adjustments. As HMRC continues tightening compliance checks, businesses with weak digital processes may face increasing risks around errors and submissions.
For many companies, MTD for VAT has already highlighted the importance of maintaining accurate bookkeeping throughout the year rather than leaving everything until quarter-end or year-end.
3. MTD for Income Tax (MTD for ITSA) — Current Rollout Phases
MTD for Income Tax Self Assessment (MTD for ITSA) is now being phased in for landlords and self-employed individuals based on qualifying income levels.
Under the current confirmed rollout phases:
- From April 2026, MTD applies to landlords and self-employed individuals with qualifying income over £50,000 based on the 2024/25 tax year
- From April 2027, it is expected to extend to those with qualifying income between £30,000 and £50,000
- From April 2028, it is expected to apply to those with qualifying income above £20,000
The rules are expected to affect:
- Landlords with qualifying property income
- Self-employed individuals
- Individuals with multiple income sources
As the rollout expands, more taxpayers are likely to need digital bookkeeping systems and quarterly reporting processes.
4. What Will Change Under MTD for ITSA?
MTD for ITSA introduces a much more structured approach to tax reporting compared to the traditional once-a-year Self Assessment process.
Taxpayers within the MTD rules will generally need to:
Maintain Digital Records
Income and expenses must be recorded digitally throughout the year using compatible software.
Submit Quarterly Updates
Businesses and landlords will need to send summaries of income and expenses to HMRC every quarter.
Complete an End of Period Statement (EOPS)
This confirms accounting adjustments and taxable profit calculations at year end.
Submit a Final Declaration
This replaces the traditional Self Assessment return and finalises the taxpayer’s overall tax position.
For landlords and self-employed individuals who currently organise records once a year, this represents a significant operational change and a move toward ongoing digital bookkeeping throughout the year.
5. Why Landlords and Businesses Should Prepare Early
Many businesses and landlords assume they can wait until the rules apply to them before taking action. In practice, early preparation can make the transition significantly easier.
Preparing early allows time to:
- Select suitable MTD-compatible software
- Improve bookkeeping systems gradually
- Separate personal and business transactions properly
- Organise digital record keeping processes
- Reduce stress around quarterly reporting deadlines
- Avoid rushed software migrations later
A landlord currently updating records once per year, for example, may soon need to maintain accurate digital bookkeeping throughout the year in order to meet quarterly reporting obligations.
Businesses that adopt digital systems early are often better positioned to manage compliance efficiently as MTD expands further.
6. What About MTD for Corporation Tax?
Making Tax Digital for Corporation Tax is still under consultation, and HMRC has not yet confirmed a mandatory implementation date.
Although the final structure remains uncertain, it is widely expected that limited companies will eventually need to:
- Maintain digital accounting records
- Use compatible accounting software
- Submit Corporation Tax information digitally
- Maintain digital audit trails between records and filings
For limited companies, this means digital bookkeeping and cloud accounting systems are likely to become increasingly important over the coming years.
Businesses that already maintain clean digital records are likely to find future MTD developments significantly easier to manage.
7. Common MTD Mistakes (And How to Avoid Them)
Using Spreadsheets Without Proper Digital Links
Copying and pasting figures between systems may not meet HMRC’s digital linking requirements.
Mixing Personal and Business Transactions
This creates bookkeeping inaccuracies and increases the risk of incorrect submissions.
Leaving Bookkeeping Until the Deadline
Quarterly reporting requires more consistent record keeping throughout the year.
Using Non-Approved Software
HMRC submissions must be made through compatible digital systems.
Poor Bank Reconciliation Processes
MTD relies on accurate digital records and regular bookkeeping reviews.
Many of these issues can be avoided by implementing proper bookkeeping systems early and maintaining organised digital records throughout the year.
8. How RAIMS Helps Businesses Stay MTD Compliant
At RAIMS Accountants, we help businesses and landlords transition to digital accounting systems in a structured and practical way.
Our support includes:
- MTD for VAT compliance
- MTD for ITSA preparation
- Digital bookkeeping support
- Cloud accounting software setup
- Bank feed integration
- Quarterly submissions
- Bookkeeping reviews and corrections
- Ongoing accounting and tax support
We work with leading HMRC-compatible platforms including Xero, QuickBooks, FreeAgent, and Sage.
Our approach focuses on:
- Clear guidance
- Fixed fee support
- Practical bookkeeping systems
- Accurate submissions
- Long-term compliance
- Simple communication without jargon
Final Thoughts
Making Tax Digital is not simply a software change — it represents a major shift in how businesses and individuals manage tax reporting in the UK.
Landlords and businesses that prepare early are likely to benefit from:
- Better financial visibility
- More organised bookkeeping
- Smoother reporting processes
- Fewer compliance issues
- Reduced HMRC risk
Those who delay preparation may face rushed transitions, bookkeeping problems, and increased pressure once quarterly reporting becomes mandatory.
Whether you are already dealing with MTD for VAT or preparing for MTD for ITSA, having the right digital systems and accounting support in place can make the process significantly easier.
Learn more about our Making Tax Digital (MTD)
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