What is Making Tax Digital?

Making Tax Digital is a HMRC initiative that is changing how businesses and individuals manage and report their tax affairs. It affects a growing range of taxpayers as it is progressively rolled out, and founders not yet required to comply may find themselves brought within scope as the programme expands. Understanding what it involves helps founders plan ahead and avoid being caught unprepared.

Making Tax Digital is a government programme designed to modernise the UK tax system by requiring businesses and individuals to keep digital records and submit tax information to HMRC through compatible software. The programme has been introduced in phases, starting with VAT-registered businesses and extending to other taxpayer groups over time. The specific groups required to comply, and the timelines for each phase, are updated by HMRC as the programme develops.

Affected businesses must use HMRC-compatible accounting or record-keeping software and submit returns through that software rather than the manual online portal. Many accounting packages are already Making Tax Digital compatible. Whether and when your business is affected depends on your tax obligations — current requirements should be confirmed with HMRC or an accountant. Our guide to Making Tax Digital covers the key requirements and how to prepare.