Making Tax Digital

What is Making Tax Digital?

Making Tax Digital (MTD) is a major government initiative designed to transform the UK tax system. Its purpose is to make tax administration more effective, more efficient, and easier for individuals and businesses to get their tax right. MTD requires taxpayers to keep digital records and submit updates to HMRC using compatible software.

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Making Tax Digital

What does MTD require?

A single final declaration will replace the traditional Self Assessment tax return. This combines all income sources and calculates the total tax due for the year.

Digital record keeping

Taxpayers must maintain their records digitally. This means recording income and expenses using software or digital spreadsheets that link directly to HMRC. Paper records alone are no longer sufficient.

Quarterly updates

Businesses and landlords must send updates to HMRC every three months. These updates summarise income and expenses for the period.

End of Period Statement (EOPS)

At the end of the tax year, taxpayers must finalise their records by submitting an End of Period Statement. This confirms any adjustments such as allowances or reliefs.

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MTD for Income Tax (MTD ITSA)

The next stage of MTD applies to Income Tax Self Assessment (ITSA). This will gradually replace the current annual tax return process. Instead of submitting one return per year, businesses and landlords will need to send quarterly updates and a final declaration at the end of the tax year.

The rollout timetable is as follows:

From April 2026: mandatory for self-employed individuals and landlords with business and property income above £50,000.
From April 2027: mandatory for those with income above £30,000.
From April 2028: expected extension to those with income above £20,000.

The government has not yet confirmed when MTD will apply to partnerships or to smaller income brackets below £20,000.

Kletta for Sole Traders

Kletta does it all for you

Digital Records Made Simple

Kletta keeps your books fully digital and always in line with HMRC rules.

Deadlines Covered

Your quarterly updates are prepared and submitted on time, every time.

Total Compliance & Peace of Mind

From VAT to Income Tax, Kletta ensures full compliance and protects you from costly late-filing penalties.

Kletta for Sole Traders

Why choose Kletta?

HMRC-ready – designed for Making Tax Digital, VAT and Income Tax.

Easiest to use

built for sole traders, no accounting jargon.

Affordable

just £29/month, no hidden costs.

Fully automated

AI handles the numbers while you grow your business.

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FAQ about Making Tax Digital

What is Making Tax Digital (MTD)?

MTD is a government initiative that requires businesses and landlords to keep digital records and submit tax information to HMRC using approved software. It aims to make tax simpler and reduce errors.

Who needs to follow MTD rules?

All VAT-registered businesses must already comply. From April 2026, self-employed individuals and landlords with income above £50,000 must join. From April 2027 the threshold drops to £30,000, and from 2028 to £20,000.

What do I need to do under MTD?

You must:

Keep your income and expenses digitally.
Send quarterly updates to HMRC.
Submit a final declaration at the end of the tax year.

Can I still use spreadsheets for my records?

Yes, but they must be connected to HMRC through “bridging software”. Kletta does this automatically, so you don’t need to worry about extra tools.

What happens if I miss a deadline?

HMRC uses a points-based penalty system. Each missed submission adds points, and once you reach the limit, you’ll be fined. Late payments also attract interest and additional charges.

How does Kletta help with MTD?

Kletta automatically keeps your records digital, prepares quarterly updates, and submits them on time. It ensures you are always compliant and helps you avoid penalties.

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