What is Making Tax Digital?
MTD will eventually require all businesses to keep digital records using HMRC-compatible software and submit their figures every quarter.
There’s been an ongoing phased rollout of MTD since 2019, with VAT-registered businesses being the first to test out the system (MTD for VAT).
MTD for ITSA is the next step.
If you are a sole trader or a landlord, you will be affected from:
- 6th April 2026, if you have an annual business or property income of more than £50,000
- April 2027, if you have an annual business or property income of more than £30,000
- April 2028, if you have an annual business or property income of more than £20,000
Making Tax Digital and Compatible Software
MTD for ITSA responsibilities include:
- Keeping digital records of your income and expenses.
- Submitting quarterly updates to HMRC on: 7th August, 7th November, 7th February and 7th May. These are like progress snapshots of your records that will give you an estimated tax bill as you go. These can be corrected later if needed and do not trigger payments.
- Completing a final end-of-year declaration – you’ll do this after your fourth quarterly update. This replaces the traditional self assessment return and is where everything is checked, corrected and finalised.
Due to HMRC’s MTD requirements, such as digital records, digital links and electronic submissions, the software you use must be MTD compatible and HMRC-approved.
The best MTD software includes the following features:
- Quarterly MTD submissions
- Bank feeds
- Receipt capture
- Accountant access
- VAT support
- Mobile app access
Can I Still Use Excel in Making Tax Digital?
Yes, it is possible to use spreadsheets like Excel; however, this is a very limited system that will affect your compliance if you don’t pair it with the right software.
You would need bridging software to act as the connector between Excel and HMRC, taking spreadsheet data, converting it into the correct format and then submitting it to HMRC.
The risks of using Excel for MTD:
- Compliance – manual edits can break digital links.
- Scalability issues – multiple income streams can get messy quickly, and it can be difficult to maintain consistency.
- Errors – Excel does not have a built-in validation, and it’s easy to overwrite formulas.
- Lack of automation – there are no bank feeds, and manual data entry will add to the administrative burden.
Why We Use FreeAgent for Making Tax Digital
At Dolan Accountancy, we use FreeAgent as it provides everything you need to successfully meet your MTD obligations.
FreeAgent:
- is fully MTD-compatible.
- automates a lot of admin burden thanks to its bank feeds, automated transaction categorisation, receipt capture, tax estimates, reminders and timelines.
- has quarterly submissions built into the workflow.
- is specifically designed for sole traders and landlords.
- simplifies the transition from self assessment.
How We Can Help You With Making Tax Digital
We can help with MTD tasks, such as:
- Setting up compliant digital bookkeeping through FreeAgent
- Managing your quarterly submissions
- Keeping your records accurate and up to date
- Ensuring you stay fully compliant and stress-free
Our MTD package includes everything you need and is just £25 +VAT per month.
If you’re an existing client, we charge an additional £10 + VAT per month to take care of your MTD needs.
If you have any further questions, our team of experts are available to answer any queries, so give us a call on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com. Alternatively, contact us via live chat.
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