Understanding MTD (Making Tax Digital) — What UK Businesses Need to Know in 2025

Making Tax Digital is no longer a future obligation — it is the present reality for businesses operating in the United Kingdom. HMRC's phased rollout of MTD has fundamentally changed how businesses maintain records and submit VAT returns, and the next wave of changes is already on the horizon.

What is MTD?

Making Tax Digital is HMRC's initiative to move the UK tax system entirely online. Under MTD, businesses are required to maintain digital records and submit tax information using HMRC-compatible software. Manual spreadsheets and paper records are no longer considered sufficient for compliance.

Where Does MTD Stand Today?

MTD for VAT is now mandatory for all VAT-registered businesses regardless of turnover. Businesses must maintain digital records and submit VAT returns through compatible accounting software.

MTD for Income Tax Self Assessment (ITSA) is scheduled to be introduced in phases, beginning with sole traders and landlords earning more than £50,000 annually from April 2026. Further expansion is expected in the coming years.

What Should Your Business Do Right Now?

Preparing early can help businesses avoid compliance issues, penalties, and unnecessary operational disruption. The following actions should be prioritised:

At The Novara Partners, we help UK businesses stay fully MTD-compliant — from VAT filing and bookkeeping to year-end accounts and tax compliance. Our goal is to ensure your business remains compliant, efficient, and focused on growth without worrying about missed deadlines or penalty notices.

Need Help With MTD Compliance?

Have questions about Making Tax Digital or want to ensure your business is fully prepared for upcoming HMRC requirements? Contact The Novara Partners today and speak with our UK tax and compliance specialists.