Making Tax Digital: What UK and Irish Businesses Need to Know and Do Now

Tax is going digital. That is not a future prediction — it is something that is already well underway, and the pace of change is only going to increase over the coming years.

If you run a business in the UK, Northern Ireland, or Ireland, the way you record, report, and submit your tax information is changing. Some of those changes are already in effect. Others are coming down the track quickly. The businesses that prepare early will find the transition far smoother than those who leave it until the deadline is at the door.

This article breaks down what Making Tax Digital actually means, what stage the rollout is at, what you need to do, and how the picture is slightly different if you operate on both sides of the Irish border.

What is Making Tax Digital?

Making Tax Digital — usually referred to as MTD — is HMRC’s programme to move the UK tax system onto a fully digital footing. The idea is straightforward: instead of businesses keeping records in whatever format they choose and submitting a summary to HMRC once a year, they will be required to maintain digital records and submit updates to HMRC on a much more regular basis.

HMRC’s stated aim is to reduce the tax gap — the difference between the amount of tax owed and the amount actually collected. That gap currently stands at an estimated £39.8 billion in the UK, according to HMRC’s own figures. Errors and failure to take reasonable care account for a significant portion of that figure, and MTD is designed to reduce those errors by making the process more automated and less reliant on manual intervention.

Where Things Stand With MTD for VAT

MTD for VAT was the first phase of the rollout, and it is already in full effect. Since April 2022, all VAT-registered businesses — regardless of turnover — have been required to keep digital VAT records and submit their VAT returns through MTD-compatible software.

If you are VAT-registered and not already doing this, you need to act immediately. HMRC has been issuing penalties for non-compliance, and there is no grace period left. The obligation applies equally to businesses in Northern Ireland, where the VAT position is already complex given the dual framework for goods and services post-Brexit. If that complexity is affecting your VAT compliance, our guide on VAT compliance for businesses operating across the UK–Ireland border is a useful starting point.

MTD for Income Tax Self Assessment — What’s Coming Now

This is the phase that is currently front of mind for many sole traders and landlords.

MTD for Income Tax Self Assessment — known as MTD for ITSA — is being introduced in stages:

• From April 2026, self-employed individuals and landlords with total gross income above £50,000 are required to comply
• From April 2027, the threshold drops to £30,000
• A further extension to those with income above £20,000 is expected to follow, with a date to be confirmed

Under MTD for ITSA, instead of filing a single Self Assessment tax return once a year, you will be required to:

• Keep digital records of all business income and expenses throughout the year
• Submit quarterly updates to HMRC via MTD-compatible software
• Submit a final declaration at the end of the tax year to confirm the figures

The quarterly updates are not full tax returns — they are essentially summaries of your income and expenditure for that quarter. But they do require your records to be maintained digitally and up to date throughout the year, not just tidied up once a year before the January deadline.

If you have been managing your self-assessment manually or through a basic spreadsheet, this is the time to review your approach. Working with northern ireland accountants who understand both the technical and practical side of MTD compliance can make the transition significantly less disruptive.

MTD for Corporation Tax — What We Know So Far

MTD for Corporation Tax is still in the earlier stages of development. HMRC has confirmed that a consultation process is underway, but no firm start date has been announced for corporation tax.

What is clear is that it is coming. The direction of travel is consistent — HMRC wants all taxes to eventually sit within the MTD framework. Businesses should treat this as a planning consideration now, even if it is not an immediate requirement.

If your financial records and accounting systems are already structured to support MTD for VAT or ITSA, adapting them for corporation tax later will be far less work. If your systems are still fragmented or partly manual, addressing that now is sensible. Digital bookkeeping support can help you get the right infrastructure in place, so that each new MTD phase becomes a straightforward step rather than a scramble.

What the Irish Picture Looks Like

Ireland operates its own tax system through Revenue, and while it does not use the MTD branding, the direction of travel is very similar.

Ireland’s equivalent of MTD is being developed progressively. PAYE modernisation has been in place since 2019, requiring employers to report payroll information to Revenue in real time. Enhanced Reporting Requirements (ERR) for certain employer expenses and benefits came into effect in January 2024. Revenue’s Online Service (ROS) is already the standard platform for most business tax filings in Ireland, and it is well established as a digital-first system.

Revenue has also been developing its approach to pre-populated returns and real-time data matching — moving in the same direction as HMRC, even if the timelines and specific requirements differ.

For businesses operating on both sides of the border, this means navigating two separate digital tax systems, each with their own filing requirements, deadlines, and compliance obligations. That is where having cross-border tax accounting specialists who understand both systems becomes genuinely valuable — not just convenient.

Choosing the Right Software

One of the most common questions businesses ask about MTD is: what software do I need?

HMRC maintains a list of MTD-compatible software on its website. The main options used by UK and Irish SMEs include Xero, QuickBooks, Sage, and FreeAgent. Each has its own strengths depending on the size and complexity of your business.

The key things to look for are:

• MTD-compatible VAT and income tax submission capability
• The ability to maintain a full digital audit trail
• Integration with your bank feeds to reduce manual data entry
• Clear reporting so you can review your position before submitting
• Scalability as your reporting requirements grow

Switching software mid-year can create gaps in your records if it is not managed carefully. If you are planning to change systems, doing so at the start of a new financial year or tax period makes the transition cleaner.

If you are unsure which software is right for your business, a conversation with an accountant who works across multiple platforms day to day is far more useful than relying on software marketing materials alone. Our SME business solutions team works regularly with business owners going through exactly this process.

What You Should Be Doing Right Now

Whether your MTD obligations are already in place or approaching, here is a practical checklist:

• Check your current compliance status — are you already meeting your MTD for VAT obligations? If not, address this urgently.
• Confirm whether MTD for ITSA applies to you — if your gross income from self-employment or property is above £50,000, April 2026 is your deadline.
• Review your record-keeping — are your records digital and up to date throughout the year? Or are they reconstructed at year end?
• Assess your software — is it MTD-compatible for every tax it needs to cover? Is it actually being used properly?
• Talk to your accountant — if you have not already discussed MTD with your adviser, do so now. The earlier you plan, the smoother the transition.
• Consider your cross-border position — if you trade in both the UK and Ireland, make sure your compliance plan covers both systems.

For a broader look at how digital records connect to your overall reporting picture, our article on what to expect during an external audit covers the kind of financial record quality that auditors — and HMRC — expect to see.

MTD and Business Planning

It is worth noting that MTD is not just a compliance exercise. Done properly, it actually gives you better information to run your business.

When your records are maintained digitally and kept up to date throughout the year, you naturally have better visibility of your financial position at any given point. That feeds directly into better cash flow management, more accurate forecasting, and stronger financial planning — all things that matter when you are trying to grow a business or navigate a difficult period.

If a business finds itself in difficulty partly because tax liabilities were not properly managed or tracked, having the right support in place matters. Recovery Accounts UK specialists can help stabilise the position, but the best outcome is always to stay on top of compliance before issues arise.

You can also explore how keeping clean digital records connects to tax relief opportunities in our article on what qualifies for R&D tax credits in the UK and Ireland — another area where having accurate, well-organised financial data makes a real difference.

For ongoing updates on tax changes and business finance, keep an eye on the SCC news and insights section, and make use of the resources available on the SCC website.

Frequently Asked Questions

Is Making Tax Digital already mandatory? MTD for VAT is already mandatory for all VAT-registered businesses. MTD for Income Tax Self Assessment is being introduced from April 2026 for those with income above £50,000. MTD for Corporation Tax has no confirmed start date yet but is in development.

What happens if I do not comply with MTD? HMRC operates a penalty points system for MTD non-compliance. You will accumulate penalty points for missed submissions, and once you reach a set threshold, a financial penalty applies. Persistent non-compliance can lead to significant penalties over time.

Do I need an accountant to comply with MTD? No, but most business owners find the transition easier with professional support. An accountant can help you choose the right software, set up your records correctly, and make sure your quarterly and annual submissions are accurate.

Does MTD apply to businesses in Ireland? MTD is a UK/HMRC programme and does not directly apply to Republic of Ireland businesses. However, Ireland has its own digital tax requirements through Revenue and ROS, and the direction of travel towards more frequent, digital reporting is consistent.

Can I still use spreadsheets under MTD? You can use spreadsheets, but they must be linked to MTD-compatible bridging software that can submit your data directly to HMRC. A standalone spreadsheet on its own is not sufficient for MTD compliance.

What is a bridging software solution? Bridging software connects your existing spreadsheet or accounting records to HMRC’s MTD system, allowing you to submit digitally without changing your entire record-keeping setup. It is a short-term solution for many businesses, but moving to fully integrated MTD software is generally more reliable long term.

Get MTD-Ready With the Right Support

MTD is not going away, and the scope of it is only going to expand. The earlier you get your systems, software, and processes into shape, the less disruptive each new phase will be.

SCC Chartered Accountants helps businesses across the UK and Ireland navigate digital tax compliance — from getting the right software in place to managing your submissions accurately and on time.

Whether you are just starting to think about MTD or already dealing with compliance queries, the team is here to help. Get in touch today and let’s make sure your business is ready.