Published: 3/27/2025
What is Making Tax Digital (MTD)?
Making Tax Digital (MTD) is a UK government initiative to modernize the tax system, requiring businesses to keep digital records and submit tax information to HMRC using compatible software. For many businesses still using spreadsheets, this shift can feel daunting—but it’s manageable with the right preparation. MTD aims to reduce errors, improve efficiency, and ensure timely submissions, helping you avoid penalties.
Who Does MTD Apply To?
✅ MTD for VAT – Since April 2022, all VAT-registered businesses (regardless of turnover) must file VAT returns digitally using MTD-compatible software.
✅ MTD for Income Tax Self-Assessment (ITSA) – Applies from April 2026 to sole traders and landlords earning over £50,000, and from April 2027 for those earning over £30,000. The threshold may drop to £20,000 by 2029, pending HMRC confirmation.
Why Act Now?
Using spreadsheets alone risks penalties for late or incorrect submissions, as manual data entry doesn’t meet MTD’s digital linking requirements. HMRC can impose fines, such as £400 per non-compliant VAT return or daily penalties of £5-£15 for failing to maintain digital records. Transitioning early ensures compliance and peace of mind.
How to Transition from Spreadsheets to MTD Compliance
1️⃣ Understand Your Obligations
📌 For VAT – You must already be filing returns digitally via MTD-compatible software.
📌 For ITSA – Prepare for quarterly updates and an end-of-year tax declaration from 2026 if you meet the income threshold.
2️⃣ Choose MTD-Compatible Software
💻 Spreadsheets can still be used with bridging software, which transfers data digitally (copy-pasting is not allowed).
🔍 Recommended software: Xero, QuickBooks, Sage, or the free FSB MTD app for simple VAT submissions. Check HMRC’s approved software list on GOV.UK.
3️⃣ Set Up Digital Record-Keeping
📊 Maintain real-time digital records of:
✅ Income 💰
✅ Expenses 💳
✅ VAT details 📜
Paper records can be backups, but all tax submissions must be digital.
4️⃣ Submit On Time
📌 VAT – Quarterly filing deadlines remain the same.
📌 ITSA (from 2026) – Quarterly updates due by the 7th of the month following each tax period (e.g., July 5 data due by August 7). The final declaration is due by January 31.
5️⃣ Get Support
✅ Work with Countify to ensure your setup is MTD-compliant, test your submissions, and avoid costly errors.
✅ Join HMRC’s ITSA public beta in April 2025 to practice before it becomes mandatory.
Benefits of Compliance
✅ Fewer errors & penalties – No more miscalculations or HMRC fines!
✅ Real-time tax visibility – Stay ahead with accurate tax tracking.
✅ Time-saving automation – Reduce admin time with efficient digital solutions.
Next Steps
Don’t wait—penalties for late or non-compliant submissions can add up quickly. Contact us to get your free checklist to get started and contact us for personalized help transitioning from spreadsheets to a fully MTD-compliant system.