Businesses in Cambridge and Nottingham
Making Tax Digital, usually called MTD, is HMRC’s system for moving tax records and submissions online. It affects VAT-registered businesses and is now being introduced gradually for sole traders and landlords using Self Assessment.
MTD is not simply about submitting information online. Businesses must maintain appropriate digital records and use compatible software to send information to HMRC.
MTD for VAT
VAT-registered businesses must generally keep digital VAT records and submit VAT returns through MTD-compatible software.
Software does not guarantee that a return is correct. Transactions still need the right VAT codes, supporting invoices and regular bank reconciliation. Spreadsheets may be used in some circumstances, but they must connect to compatible software through the required digital links.
MTD for Income Tax
Making Tax Digital for Income Tax began in April 2026 for sole traders and landlords with qualifying self-employment and property income above £50,000, based on their 2024/25 tax return.
The requirements will extend to those with qualifying income above:
- £30,000 from April 2027
- £20,000 from April 2028
Qualifying income is generally gross income from self-employment and property before expenses. HMRC considers the combined total where someone has both sources.
Those within MTD must keep digital records and send quarterly summaries of income and expenses. A year-end process is still required to make tax adjustments, include other income and finalise the Self Assessment return. Quarterly updates are not four complete tax returns, and they do not automatically change when tax is paid.
Benefits and Challenges
Regular digital bookkeeping can provide more current information about profit, expenses and cash flow. It may also reduce paperwork and make it easier for a business and its accountant to work from the same records.
However, businesses may face software costs, training requirements and additional administration. Leaving bookkeeping until the quarterly deadline can turn MTD into four stressful exercises each year.
Preparing for MTD
Businesses should:
- Check when MTD applies to them
- Choose suitable cloud accounting software
- Keep business and personal transactions separate
- Upload receipts regularly
- Reconcile the bank account
- Decide who will submit each update
Sole traders and landlords in Cambridge and Nottingham should prepare before their mandatory start date. Establishing a simple digital bookkeeping routine now will make MTD easier to manage and provide more useful financial information throughout the year.
