Making Tax Digital (MTD) 2026 — VAT, Income Tax & Software Rules

Making Tax Digital already governs every UK VAT return — and from April 2026 it reaches Income Tax too. Here is who must comply, what "digital" legally means, and how to get compliant without overpaying for software.

MTD for VAT: Mandatory Since April 2022

Every VAT-registered business must keep digital records and file returns through MTD-compatible software. Typing figures into the HMRC portal or posting paper returns no longer counts as filing. The rules:

Selling from the EU? Registration comes first — start with our UK VAT & EORI guide for EU sellers.

• Digital records: supplies made and received, VAT charged and reclaimed, adjustments — stored digitally from the transaction.
• Digital links: data must flow to HMRC via API with no manual retyping between systems. Copy-paste breaks compliance.
• Compatible software: anything on HMRC's recognised list, including bridging software that connects your existing spreadsheets to HMRC.

MTD for Income Tax (ITSA): From April 2026

Last verified: 26 September 2026. Sources: HMRC MTD guidance. Thresholds and dates follow announced policy — confirm with HMRC or your accountant before acting.

Official sources: HMRC Making Tax Digital · HMRC VAT registration

Can You Still Use Spreadsheets?

Yes — with a bridge. A spreadsheet plus HMRC-recognised bridging software satisfies MTD, and it is often the cheapest path for small traders already living in Excel or Sheets. What fails compliance is the manual step: opening the HMRC portal and typing the numbers in yourself.

Digital Records You Already Produce Here

MTD's record-keeping overlaps neatly with EuTaxFlow's outputs:

• Compliant invoices from the Invoice Generator (sequential numbering, VAT breakdowns) feed straight into your digital records.
• Structured e-invoices from the UBL E-Invoice Kit are machine-readable by definition — the gold standard MTD likes.
• VAT math verified with the VAT Calculator (UK 20% preset) before it enters your books.

What "digital" actually means in practice

MTD is often described as "going digital", which sounds like a change of software. It is not. It is a requirement about where your data lives and how it reaches HMRC — and most non-compliance comes from a break in that chain rather than from the wrong tool.

The three requirements interact, and passing one while failing another still fails:

• Digital records are about the source. Your transactions have to be captured and retained digitally from the moment they happen, in a form that can be produced on request. A pile of paper invoices that someone later retypes is not a digital record.
• Digital links are about the journey. The data has to move from your records into the return through an API, without a human copying it across in between. This is the step most often broken: a bookkeeper exporting a spreadsheet and re-keying the numbers into the portal has broken the link, even if every figure was correct.
• Compatible software is about permission. It has to be on HMRC's recognised list, which includes bridging software precisely so that businesses living in spreadsheets are not forced to abandon them.

A useful test: if a figure has to be typed twice — once into your own system and once into HMRC's — you are not yet meeting the digital-links requirement, however good the software is at each end.

Setting up MTD: the order that works

The order matters more than the speed. Doing these in the wrong order is how businesses end up compliant-looking but not actually compliant.

1. Decide where your records live first. Pick the system that will be the single source of truth, before you pick filing software. Anything that changes later has to be re-linked.
2. Choose your software second. Confirm it is on HMRC's recognised list, and that it can actually read from your record-keeping system rather than requiring you to re-enter data.
3. Fix your VAT period end dates. Returns and records must line up. A mismatch here produces reconciliation work at the worst possible moment.
4. Map your data fields. Decide in advance which figures feed the return and which stay internal. This is the step that prevents the manual retyping described above.
5. Run a parallel period. File one period through the new route while keeping the old records, and reconcile before you rely on it.
6. Go live, then stop the old route. Only once the parallel period reconciles should the previous filing method be abandoned.

For Income Tax, add one more step at the end: MTD for Income Tax introduces quarterly digital updates and a final declaration, so the filing rhythm is not simply the VAT return with a different label. The thresholds and dates are on the HMRC guidance linked above.

A go-live checklist

Before you file your first return through MTD, confirm each of these. They are the points where a business discovers it is not ready, and most of them are far cheaper to fix before the first filing than after.

• Every source document exists in digital form, and can be produced on request without anyone reconstructing it from memory.
• No figure is typed twice between your records and the return.
• Your VAT period dates match the periods your software will file for.
• The software you selected is on HMRC's recognised list, and you have checked the version you actually installed rather than the product name.
• Someone else on the team understands where the records live and how the filing runs — so a holiday or a resignation does not stop the return.
• You have a reconciled parallel period before abandoning the old route.

Frequently Asked Questions

Disclaimer: General information only — not tax advice. Confirm with HMRC or a UK accountant. Current as of September 2026.