Understanding Making Tax Digital: What it means for you and your client

Making Tax Digital (MTD) is a major government initiative aimed at modernising the UK tax system. Launched with the intention of closing the tax gap and improving the accuracy of tax reporting, MTD is transforming the way individuals and businesses report their tax liabilities to HM Revenue & Customs (HMRC).

In this video, Bright’s Chief Product & Technology Officer Ben Bishop, VP of Product Paul Onions and Head of Product James Reilly discuss what MTD is and how it will impact accountants and their clients.

What is Making Tax Digital?

MTD is about moving from the traditional tax filing systems to a fully digital process. This means that taxpayers are required to keep accurate and up-to-date digital records and submit their tax information on a quarterly basis, rather than just once a year.

Under this new regime, it’s not just about submitting a self-assessment tax return at the end of the financial year but rather providing more regular updates on your tax position. This approach helps HMRC to get a clearer picture of taxpayers’ income and expenses throughout the year, reducing errors and the risk of underpayment or overpayment of tax.

Who does Making Tax Digital affect?

Initially, MTD was introduced for VAT-registered businesses, however HMRC is now extending the scope of MTD to include sole traders and landlords with qualifying income over £50,000.

HMRC has already contacted those affected by MTD ITSA, including sole traders and landlords whose income meets certain thresholds. From April 2026, these taxpayers will need to submit income and expense data quarterly instead of waiting until the end of the tax year.

One important consideration is that some of these individuals might not have previously engaged with digital bookkeeping tools. This shift will inevitably mean increased support and guidance from accountants, who will play a fundamental role in helping clients adopt the right digital systems and comply with MTD requirements.

What does this mean for accountants?

MTD is driving a significant change in the way accountants work with their clients. Traditionally, accountants have often been seen as the ‘year-end’ compliance experts who prepare tax returns after the close of the tax year. Now, with MTD encouraging more regular reporting, accountants have an opportunity to shift towards becoming proactive business advisors.

By accessing financial data on a regular basis, accountants can engage more closely with their clients throughout the year, monitoring business performance and offering timely advice.

The digital bookkeeping tools that underpin MTD also enable accountants to identify potential problems early. This ongoing interaction transforms the accountant’s role from simply being a numbers person to becoming a trusted expert who helps businesses thrive and succeed.

A new era in tax compliance

MTD represents the most significant overhaul of the UK tax system since self-assessment was introduced in 1997. While it may feel like a big shift, the staggered rollout of MTD updates throughout the year gives individuals, businesses and their accountants time to adapt and transition.

In summary, Making Tax Digital is about more than just compliance. It’s about embracing digital innovation to improve transparency, accuracy, and efficiency in tax reporting. By keeping records digitally and submitting data regularly, taxpayers can stay on top of their tax affairs, while accountants can provide more meaningful, real-time support.

As the UK tax landscape continues to evolve, those who embrace Making Tax Digital—and partner with their accountants effectively—will be best placed to thrive in this new digital era.

Stay tuned for our next blog and video, where we share Bright’s advice on how accountants can best prepare for MTD.

For more information about Making Tax Digital, visit our MTD hub.

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.