Making Tax Digital

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What Is Making Tax Digital?

Updated 17/07/2025

Making Tax Digital (MTD) is HMRC’s initiative to modernise the UK tax system. It requires businesses and individuals to keep digital records and submit their tax returns using compatible software.

It’s not just about filing online — MTD changes how and when you report your financial activity.

HMRC Overview:
https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

What Does Compliance Involve?

To be MTD-compliant, you must:

  • Keep digital records

  • Submit quarterly tax updates through MTD-compatible software

  • Provide a final declaration at year-end

Common Misunderstandings About MTD

  • "It’s only for big businesses."
    False — all VAT-registered businesses are included, no matter their size.

  • "I can't use spreadsheets anymore."
    You can — but only if used with bridging software.

  • "It’s just online filing."
    Not quite. MTD requires digital bookkeeping and more frequent submissions.

    Benefits of Going Digital

    • Fewer errors from manual entry

    • Real-time insight into your business finances

    • Easier collaboration with your accountant

    • Less last-minute stress at tax time

    • Improved compliance with HMRC deadlines

    What Happens If I Don’t Comply?

    HMRC uses a points-based penalty system:

    • Late submissions: points accumulate and eventually trigger fines

    • Late payments: interest charges begin the day after payment is due

    Details from HMRC:

    How to Get Ready Now

    • Start using digital accounting software (like Xero, or QuickBooks)

    • Speak with your accountant to review your setup

    • Begin storing receipts and records digitally

    • Book an MTD preparation review with Clear Blue Sky Accountancy

    How Clear Blue Sky Accountancy Can Help

    We support businesses and individuals with:

    • Software setup and support

    • Record-keeping guidance

    • Quarterly digital submissions

    • Ongoing advice tailored to your business

    We’re here to make your MTD journey simple and stress-free.

    Final Thoughts

    Making Tax Digital isn’t going away — but it doesn’t have to be overwhelming. Preparing now means less hassle later and more time to focus on your business.

    Want help getting ready? We're just a call or message away.

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