Making Tax Digital (MTD): What You Actually Need to Know
Making Tax Digital (MTD) is HMRC’s plan to drag the tax system into the 21st century. No more paper records, last-minute self-assessments or spreadsheet juggling. Instead: digital records, quarterly updates, and approved software that talks directly to HMRC.
Think that sounds like a faff? That’s where Xolve comes in.
Xolve makes MTD simple. Whether you’re a sole trader, small business owner, landlord or contractor, we’ll help you go digital, stay compliant, and dodge the deadline panic. We handle all the financial bits – bookkeeping, tax, payroll, registry services and more – for one easy monthly fee. No hidden costs. No jargon. Just peace of mind.
What Is Making Tax Digital (MTD)?
MTD is a government initiative to modernise the UK tax system. In real terms, it means keeping digital records of your income and expenses, using MTD-compatible software, and submitting quarterly updates to HMRC instead of one annual tax return.
The rollout has started in phases. MTD for VAT is already live. If you’re VAT-registered, you should be using digital tools to submit your returns. MTD for Income Tax kicks in from April 2026 for anyone earning over £50,000, and from 2027 for those earning over £30,000. MTD for Corporation Tax is expected further down the line, though not before 2026.
Not sure where you fit into all this? That’s what our free MTD Readiness Review is for.
What Happens If You Don’t Comply with MTD?
Ignoring Making Tax Digital isn’t an option. HMRC is phasing out old-school tax returns, and failure to comply could mean fines, interest charges and serious admin headaches.
If you miss a deadline or submit incorrect info, HMRC’s new points-based penalty system kicks in. It’s not a slap on the wrist – it adds up fast. The longer you leave it, the messier it gets.
That’s why we don’t wait until it’s urgent. At Xolve, we keep your records clean, your submissions on track, and your stress levels low – so you’re always ahead of the game.
Pick a Package, Not a Puzzle
Whether you’re a one-person band or running a growing business, Making Tax Digital is going to change how you manage your finances. Some people are already in. Others have a bit more time. But make no mistake—everyone’s heading the same way.
Here’s what it looks like depending on how you work:
Why Go Digital Now (Even If You Don’t Have To Yet)
You might not be mandated yet – but you will be. Going digital before it’s forced on you gives you time to get comfortable, sort out your systems and avoid that last-minute panic when the rules change.
More importantly, digital bookkeeping doesn’t just keep HMRC happy – it helps you run a better business. You’ll get clearer cashflow insight, faster reporting and fewer surprises when it’s time to pay up.
With Xolve, the switch is easy. We’ll do the setup, manage the transition and make sure everything ticks along smoothly in the background. You’ll barely notice the difference – except in how much easier life gets.
Still Got Questions?
You’re not the only one. Making Tax Digital comes with a lot of fine print – but we’ve cut through the noise. These are the questions we get asked most often, answered in plain English.
What is MTD and why does it matter?
MTD is a UK government program to modernise tax reporting. It requires taxpayers to keep digital records and submit tax information online using approved software. The idea is to make tax easier to get right – reducing errors, simplifying the process, and giving you more up-to-date insight into what you owe. It matters because over the next few years MTD will change how businesses, sole traders, and landlords have to do their taxes. Adopting digital record-keeping now will save you time and ensure you comply with new laws as they take effect.
Who has to comply with MTD and when?
VAT-registered businesses need to follow MTD for VAT now – it’s already mandatory to use digital software for VAT returns. For Income Tax Self Assessment, MTD kicks in from April 2026 for individuals (like sole traders and landlords) with income over £50,000, and from April 2027 for those over £30,000. Partnerships will be included later (after 2027, date to be confirmed). In short, if you’re a small business owner, self-employed, or a landlord, check your income level to see when you must join MTD. Even if you’re below the threshold right now, MTD may affect you in the future as the scheme expands.
How do I comply with MTD?
To comply with MTD, you need to use MTD-compatible software to maintain your accounts and submit updates to HMRC. This means switching from paper or basic spreadsheets to a digital solution (like Xero, QuickBooks, or similar). You’ll send HMRC a summary of your income and expenses every quarter, directly from your software, and then a final year-end report to confirm everything. The key steps are: sign up for MTD with HMRC (when you’re mandated or ready), choose a software that’s on HMRC’s approved list, and keep your bookkeeping up to date. Xolve can take care of all these steps for you – we’ll set you up with the right tools and even handle the quarterly submissions if you prefer. Complying with MTD is much easier when you have an expert guiding you through each requirement.
What if I’m not good with tech or bookkeeping?
Don’t worry – MTD is meant to make things simpler, not harder. You don’t need to be a tech whiz. There are very user-friendly apps that link your bank and help automate a lot of data entry. And you always have the option to work with an accountant (like Xolve) who can manage the digital process for you. If using software yourself isn’t practical, HMRC does allow certain exemptions (for example, due to age, disability or lack of internet access), but most businesses will need to follow the rules. The good news is that with a bit of setup, many people find digital record-keeping saves them time. Xolve’s supportive team can train you on the basics or completely handle it on your behalf – making tax digital and stress-free.
How can Xolve help with MTD compliance?
Xolve’s mission is to make the financial side of your business hassle-free, and that includes MTD. It all starts with an assessment of your needs. From there, Xolve gets you started on the right software, whether you’re a sole trader or a growing company. Xolve's accountants will keep your books up to date digitally, prepare your quarterly MTD submissions, and ensure you never miss a deadline. Essentially, Xolve acts as your finance department: handling bookkeeping, VAT returns, payroll, and more, all in compliance with MTD requirements. With simple monthly pricing and unlimited support, you’ll always know that experts are looking after your obligations.