Making Tax Digital Compliance Checklist 2026: Are You Ready?

Making Tax Digital (MTD) is HMRC's plan to digitise the UK tax system. It's no longer coming—it's here. VAT-registered businesses already must comply, and Income Tax Self Assessment is next. This checklist covers everything you need to know to stay compliant.

What is Making Tax Digital?

Making Tax Digital requires businesses to:

Keep digital records of income and expenses
Use MTD-compatible software to maintain those records
Submit tax returns through that software (not through HMRC's website)

The key word is "digital." Spreadsheets qualify if they connect to bridging software, but paper records don't.

MTD Timeline: Key Dates

Tax Type	Who	When	Status
VAT	All VAT-registered businesses	April 2022	Now mandatory
Income Tax (ITSA)	Self-employed/landlords > £50,000	April 2026	Coming soon
Income Tax (ITSA)	Self-employed/landlords > £30,000	April 2027	Confirmed
Income Tax (ITSA)	Self-employed/landlords > £20,000	TBC	Under review
Corporation Tax	Limited companies	TBC (likely 2028+)	Not yet confirmed

MTD for VAT Compliance Checklist

VAT-registered businesses must already comply with MTD. Use this checklist to ensure you're compliant:

Software Requirements

Using MTD-compatible software - HMRC maintains a list of approved software. Generic spreadsheets alone don't qualify.
Software can submit VAT returns - The software must file directly to HMRC, not just prepare the return.
Digital links between systems - If you use multiple systems, data must flow digitally between them (no manual re-keying).

Record-Keeping Requirements

All sales and income recorded digitally - Every invoice, sale, and income source.
All purchases and expenses recorded digitally - Every receipt, bill, and expense.
VAT on each transaction recorded - The software must track VAT separately.
Date of each transaction recorded - Not just "January expenses" but specific dates.
Value of each transaction recorded - The actual amount, not rounded figures.

Filing Requirements

File VAT returns through software - You cannot file through HMRC's website anymore.
Quarterly submissions - Most businesses file quarterly, some monthly.
9-box VAT return format - Your software must support the standard format.
Payment arranged separately - MTD is for filing; you still pay through HMRC's normal channels.

Common MTD for VAT Mistakes

Using spreadsheets without bridging software

Excel or Google Sheets can be part of your MTD-compliant system, but only if they connect to bridging software that submits to HMRC. A standalone spreadsheet doesn't comply, even if it's digital.

Manual data entry between systems

If you enter sales in one system and manually type totals into another for VAT filing, that's not a "digital link." The data must flow automatically or through copy/paste of digital data.

Not recording the full transaction detail

MTD requires you to record the date, value, and VAT for each transaction—not just totals. Monthly summaries don't comply.

MTD for Income Tax Compliance Checklist

MTD for Income Tax Self Assessment (MTD ITSA) applies to self-employed individuals and landlords. Limited companies are not covered yet.

Who Must Comply and When

April 2026: Self-employed individuals and landlords with income over £50,000 (see our full Making Tax Digital 2026 guide)

April 2027: Those with income over £30,000

Future (TBC): Those with income over £20,000 (date not confirmed)

What MTD ITSA Requires

Keep digital records - All income and expenses for your self-employment or property business.
Use compatible software - HMRC will publish a list of approved MTD ITSA software.
Submit quarterly updates - Four updates per year, plus a final declaration.
Year-end declaration - Replaces the current Self Assessment tax return.

Quarterly Update Schedule

Under MTD ITSA, you'll submit updates for:

Quarter	Period	Deadline
Q1	6 April - 5 July	7 August
Q2	6 July - 5 October	7 November
Q3	6 October - 5 January	7 February
Q4	6 January - 5 April	7 May
Final Declaration	Full year	31 January (following year)

MTD ITSA Preparation Checklist

Now (before April 2026):

Know if you're affected - Check if your self-employment or rental income exceeds the threshold.
Choose MTD-compatible software - Don't wait until the last minute. Start using it now to build habits.
Start keeping digital records - Even if not required yet, digital records make the transition easier.
Separate income streams - If you have multiple businesses or properties, ensure records are separate.

6 months before your start date:

Sign up for MTD ITSA - HMRC will open sign-up before the mandatory date.
Link software to your HMRC account - This requires Government Gateway credentials.
Test quarterly submissions - Do a trial run before it's mandatory.
Train yourself on the software - Understand how to categorise transactions correctly.

MTD for Corporation Tax (Future)

Limited companies will eventually need to comply with MTD for Corporation Tax, but no date has been confirmed. Current expectations are 2028 at the earliest.

What to Expect

Based on MTD for VAT and ITSA patterns:

Digital record-keeping requirements
Filing CT600 through compatible software only
Possibly quarterly reporting (though this is uncertain for CT)
Digital links between accounting systems

How to Prepare Now

Even though MTD for Corporation Tax isn't mandatory yet, limited companies should:

Already use digital accounting software - If you're still using spreadsheets, now is the time to switch.
Keep detailed digital records - Every transaction with date, amount, and category.
Ensure software is MTD-compatible for VAT - If you're VAT-registered, you already need this.
Choose software with a roadmap for CT - Check that your provider plans to support MTD for Corporation Tax when it launches.

MTD-Compatible Software Options

HMRC maintains lists of compatible software for each MTD scheme:

For VAT

All major accounting platforms are MTD for VAT compatible:

Xero
QuickBooks
FreeAgent
Sage
AccountsOS
Many others (100+ approved)

For Income Tax (ITSA)

Fewer options currently, but expanding:

HMRC's free software (limited functionality)
Major platforms adding support
Check HMRC's official list closer to April 2026

Key Features to Look For

When choosing MTD software, ensure it offers:

Direct HMRC submission - File returns without leaving the software.
Bank feeds - Automatic import of transactions from your bank.
VAT tracking - Automatic VAT calculation on each transaction.
Digital receipt storage - Keep receipt images linked to transactions.
Quarterly reporting - Built-in reports matching MTD periods.
Audit trail - Records of all changes for HMRC enquiries.

Common MTD Penalties

Non-compliance with MTD carries penalties:

Late Submission Penalties (Points-Based)

Each late submission = 1 point
Reach the threshold = £200 penalty
Further late submissions = £200 each
Points expire after 24 months of compliance

Submission Frequency	Penalty Threshold
Annual	2 points
Quarterly	4 points
Monthly	5 points

Late Payment Penalties

15 days late: First penalty (2% of tax owed)
30 days late: Additional 2%
31+ days late: 4% annual rate on outstanding amount

Interest

Interest accrues on late payments from the due date at the Bank of England base rate + 2.5%.

MTD Exemptions

Some businesses are exempt from MTD:

Digital exclusion - If it's not reasonably practicable due to age, disability, remoteness, or religious beliefs.
Insolvency - Companies in formal insolvency procedures.
Income below threshold - For MTD ITSA, income below the relevant threshold.

Exemptions must be claimed from HMRC; they're not automatic.

MTD Compliance Checklist Summary

If You're VAT Registered (Now)

Using MTD-compatible software
All transactions recorded digitally
VAT returns filed through software
Digital links between any connected systems
Records available for 6 years

If You're Self-Employed/Landlord (Before April 2026)

Know if you exceed the £50,000 threshold
Chosen MTD ITSA compatible software
Started keeping digital records
Plan for quarterly submissions
Understood the final declaration process

If You Have a Limited Company (Ongoing)

Using digital accounting software
VAT compliant (if VAT registered)
Software provider has MTD CT roadmap
Records detailed enough for future requirements

How AccountsOS Handles MTD Compliance

AccountsOS is built for MTD from the ground up:

MTD for VAT: Full compliance. File your VAT return directly to HMRC from the app. Digital links maintained automatically. All records stored with required detail.

MTD for Income Tax: Ready for April 2026. Quarterly update preparation built in. Digital records already meet ITSA requirements.

MTD for Corporation Tax: When HMRC confirms requirements, AccountsOS will support them. Your digital records are already compliant-ready.

Key features for MTD:

Automatic bank feed imports (digital records from day one)
AI categorisation with full transaction detail
Receipt scanning and digital storage
Direct HMRC submission for VAT
Audit-ready record keeping
6+ year record retention

Don't wait until deadlines loom. Get compliant now and avoid the last-minute scramble. See how AccountsOS works and our pricing.

Frequently Asked Questions

Can I still use spreadsheets under MTD?

Yes, but only if connected to bridging software that submits to HMRC. A standalone spreadsheet doesn't comply. Most businesses find it easier to use proper accounting software that handles everything.

What happens if I don't comply with MTD?

You'll face penalties for late filing and potentially for failure to maintain digital records. HMRC can also charge penalties for inaccurate returns. Persistent non-compliance can trigger compliance checks.

Is free software available for MTD?

HMRC offers free software for some MTD schemes, but it's basic. For businesses with any complexity, paid software is worth the investment for time savings and reduced error risk.

Do I need to keep paper receipts if I have digital copies?

No. A clear digital image of a receipt is acceptable. Many businesses now go fully paperless, snapping receipt photos and discarding the paper. Ensure images are legible and stored securely for 6 years.

What counts as a "digital link"?

A digital link means data transfers between systems without manual re-keying. Copy/paste of digital data counts. Manually typing numbers from one screen to another doesn't. The link must be unbroken from source to submission.

Will MTD affect my tax bill?

MTD is about how you keep records and file returns, not how tax is calculated. Your tax bill should be the same whether you file through MTD software or (previously) through HMRC's website. However, better record-keeping often helps identify allowable expenses, potentially reducing your bill.