Making Tax Digital (MTD) is HMRC's long-running programme to move tax record-keeping and filing online. If you run a small business in the UK, it has quietly reshaped what "keeping your books" means — and 2026 brings the next big step. Here's a plain-English summary of where things stand.

What Making Tax Digital actually requires

MTD isn't a new tax. It's a change in how you keep records and submit returns. Under MTD you must:

  1. Keep your records digitally — in software or a spreadsheet, not a shoebox of receipts.
  2. File your returns using MTD-compatible software that connects to HMRC directly, rather than typing figures into the old online form.
  3. Maintain "digital links" — the data should flow from your records to your return without manual re-typing that could introduce errors.

That third point is the one businesses underestimate: copy-pasting a total from a spreadsheet into another spreadsheet by hand can break the digital link HMRC expects.

MTD for VAT: already mandatory

Since April 2022, MTD for VAT applies to all VAT-registered businesses, regardless of turnover. (It originally only covered businesses above the £85,000 threshold, but that exemption is gone.)

In practice this means every VAT-registered business should be:

  • Storing VAT records digitally, including the details from each purchase and sales invoice.
  • Submitting VAT returns through compatible software.

A digital record of a purchase generally needs the supplier's name, the date, the VAT-exclusive value, and the VAT rate. A clear digital image of the receipt or invoice, captured and stored, is the simplest way to back that up.

What's changing in 2026: MTD for Income Tax

The Making Tax Digital rollout: VAT from April 2022, Income Tax from April 2026 for income over £50,000, extending to over £30,000 in April 2027

The next phase is Making Tax Digital for Income Tax Self Assessment (MTD for ITSA), and it's phased in by income level:

  • From April 2026 — sole traders and landlords with qualifying income above £50,000.
  • From April 2027 — those with income above £30,000.

Affected taxpayers will keep digital records and send quarterly updates to HMRC, instead of one annual Self Assessment scramble. If that's you, the habit to build now is simple: capture income and expenses as they happen, digitally, so the quarterly update is a review rather than a reconstruction.

What this means for your receipts

The thread running through every phase of MTD is the same: your records have to be digital, accurate, and ready to file. For most small businesses the friction isn't the filing — software handles that — it's the data entry. Every paper receipt that sits in a drawer is a future evening of typing and a chance to miss reclaimable VAT.

The businesses that find MTD painless are the ones that capture each receipt and invoice digitally at the point it lands — a quick photo, the supplier and amount recorded, the right category and tax code applied. Do that consistently and "keeping digital records" stops being a quarterly project and becomes something that just happens in the background.

A short checklist

  • Confirm you're filing VAT through MTD-compatible software (mandatory since 2022).
  • Store a digital copy of every purchase and sales invoice.
  • If your income is over £50,000 as a sole trader or landlord, prepare for quarterly updates from April 2026.
  • Avoid manual re-typing between systems — keep the digital link intact.

This article is general guidance, not tax advice — rules and thresholds change, so check the latest position on gov.uk or with your accountant. ReceiptTidy helps UK small businesses capture receipts and invoices digitally and push them straight to QuickBooks or Xero, so MTD-ready records build themselves.