If you’ve been keeping up with financial news (or the Angel Bookkeeping blog), you’ll likely have spotted a few updates about Making Tax Digital (MTD). Specifically aimed at self-employed individuals and landlords, the scheme aims to digitise tax reporting. But, will this new approach make tax compliance easier, and what should you do if you need MTD help?
To make the changes easy, our bookkeeping team in West Sussex have everything you need to know.
What is MTD?
Making Tax Digital for Income Tax and Self-Assessments (MTD for ITSA) involves new governmental regulations around how certain businesses report their tax. In essence, it requires you to file four quarterly updates along with a final declaration – replacing the current annual Self-Assessment – and maintain digital records of your finances using MTD-compatible software.
The changes will come into effect on 6 April 2026 for landlords and self-employed individuals with an income of over £50,000.
From April 2027, you’ll need to follow MTD regulations if you’re self-employed or a landlord earning over £30,000.
For more information on what MTD is, check out our recent blog What is Making Tax Digital for ITSA? You can also head over to the government website for more information on the legislation.
What Are the Benefits of MTD?
After the changes were announced, we’ve had a lot of our bookkeeping clients asking one question: why?
How will MTD benefit your small business, and will it really make tax compliance easier? We’ve taken a closer look at the new process and its expected impact to learn more.
Improving Financial Reporting Accuracy
One of the key reasons the government is introducing MTD is to improve accuracy.
Going through your income and expenses once every 3 months helps you get on top of your finances. With only 3 months of figures to deal with rather than 12 months, it’s also a lot easier to track your cash flow. For your annual report, you’ll be able to use your quarterly records to quickly gain an overview of your entire year, which – in theory – will be easier to manage than an annual Self-Assessment.
A Better Understanding of Your Finances
Quarterly check-ins are a great way to better understand your finances. By complying with MTD, you’ll naturally start to learn more about your fluctuating cash flow. This can help you pinpoint the times of year when your revenue is higher, for example, or adjust your savings goals based on quarterly performance.
At Angel Bookkeeping and Payroll Services, we’re big believers in staying on top of your finances. If MTD encourages more self-employed individuals to take charge of their money management, it could be a great scheme to empower business owners.
Improve Efficiency and Accuracy With Digital Tools
Digital software is fantastic for financial reporting. From tracking your income to creating quick totals from different revenue streams, it makes money management tasks that little bit easier.
Reputable digital software is unlikely to make mistakes, too, reducing the chance that you file an incorrect tax return.
By making it a requirement to switch to digital tax reporting, the government is hoping to drive both efficiency and accuracy. As users of digital bookkeeping tools (like BrightPay and Sage), we think this is a great move.
Ditch Piles of Paperwork
Paper financial reporting is old news! With the push towards digital, the few remaining businesses still using paper will be encouraged to make the switch. This makes it far easier for businesses – like yours and ours – to communicate with one another.
For example, let’s say we need to see your bank statements from the past 3 years. Rather than sending us reams of paper statements in the post, you can simply upload a few digital statements to an email and get them to our team in a matter of minutes. Simple, effective, and far better for the environment than countless sheets of paper.
Will MTD Make Financial Reporting Harder?
MTD certainly has its benefits, but that doesn’t mean it’s all sunshine and rainbows. For self-employed individuals, MTD does mean more work.
This is largely due to the 4 reports required alongside a final declaration. Rather than carrying out all of your tax reporting once a year, you’ll be crunching numbers every 3 months and still be required to put together a full annual summary of your income and expenses.
Some people may also struggle to make the switch to MTD-compliant software. If you’re used to your existing systems and can’t get to grips with digital platforms, you might find your tax reporting is made more difficult.
MTD Help: How Bookkeeping Makes Compliance Simpler
With any financial change comes some confusion and concern. That’s where our team at Angel Bookkeeping and Payroll Services shine.
We offer a number of tax services that double as MTD help, making your financial reporting a whole lot simpler. From setting up a tax-compliant payroll system to clearly and regularly recording all of your monetary transactions, we’ll handle the management side of your compliance to make reports a breeze.
We’re also experts when it comes to switching paper filing to digital software. With the use of BrightPay and Sage, we can help you get ahead of MTD compliance with a system that suits your business.
Get MTD Help in West Sussex
If MTD is worrying you, we’re here to help. With our bookkeeping services in West Sussex, we’ll make sure you’re ready for the government changes, and understand how you can update your processes to remain tax-compliant.
To learn about our MTD help, get in touch with our friendly team today.