S5 E3: What do I need to do today for Making Tax Digital (MTD)

In April 2026 HMRC’s Making Tax Digital finally goes live. 

In the 3rd episode of my Making Tax Return series I run through:

Signing up for MTD with HMRC: https://www.gov.uk/guidance/sign-up-your-business-for-making-tax-digital-for-income-tax

Getting your software ready to go.

Do you need to do any bookkeeping right now?

Here is a link to a short blog that covers the basics of Making Tax Digital: https://www.loudandclearaccounting.co.uk/blog/post/26030/what-is-making-tax-digital-mtd/

Transcript

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Hello, my name is Claire and welcome to the Loud and Clear Accounting Podcast. This is the Accountancy Podcast where we answer accountancy-based questions. In this current series, we're focusing on making tax digital. And in today's episode, I want to just run through what you need to have in place to enable you to make that first submission in July 26th, assuming you are in that first batch of clients that are going to be joining the Making Tax Digital system. So the first thing you need to do is log into your HMRC account and actually register for Making Tax Digital. Now I know HMRC already know that you need to take part. They know because they've taken the income that you put on your 24-25 tax return and you've probably already received a letter for them. But the reason you need to log into your account and sort of officially sign up is because you need to have Making Tax Digital added as a service to your account. If you don't do this, you can do every other step. You can have your software, you can be ready to press submit. But the second you enter your HMRC details for that form to go through, it's going to bounce back and be rejected. So it's purely a software thing. You just want that sort of gateway to be there so that you can make that submission. So that is the first thing to do. Log into HMRC and sign up. The second thing is if you haven't got software, I would recommend signing up to one now. Now, for my clients, I'm recommending either Free Agent or Xero. Now, Zero do have a sort of stripped back making tax digital one. They call it Zero Simple. If you're going in, just as a bit of a heads up, they hide it. So when you go on their plan page, they'll show you their standard ones. Scroll down the page and you'll see Zero Simple hidden at the bottom. I don't think Xero want people to sign up to that. So they're not making it overly clear if you know you just go on their page and see what comes up straight away. You don't have to use Xero or Free Agent. Nearly all of the main software companies are ready for it. So if you've already, you know, you've got friends who use QuickBooks or you're getting something like Fresh Books or Zoho books free with your bank account, just sign up to those. Make sure that you've linked your bank account to the software. Now nearly all of them will go through this step as part of the setup processes. So just follow their sort of setup wizard. They'll show you how to do that because it varies between banks, whether you log in through the software and enter your bank details, or you log into your bank's app and link it that way. But that's what you want to do. You want to have your software in place, you want to have your bank account linked so those transactions are filtering through. Now, if you're not interested in doing bookkeeping, it's not something you've ever done. You don't think it's going to bring much value to you. Once you've done those sort of three steps, just walk away. You're not going to be able to submit anything until July anyway. So what you want is when it comes to July or early August, whenever you decide to do it, that you're going to be able to log in, you're going to have all of your bank transactions there to categorize into the HMRC headings. And you know that when you press submit, it's going to go through. So that is all you need to do. If you're looking into making text digital, but you know that you're not going to be joining it until April 27th, April 28th, depending on your turnovers. You don't need to do the HMRC sign up step now. Now obviously you can. HMRC are never going to stop anyone from signing up early to this, but you don't have to. But you could decide that you're going to sell up some software now and you're going to play with it and you're going to get used to it and maybe start doing your bookkeeping. So when you come to doing making tax digital, you are ready for it. Now I find with my clients with the lower turnovers, you're the ones that are the most likely to still be using personal bank accounts and having things spread across because cash flow is often a little bit tighter. You could have some things going through personal accounts, a bit through PayPal, a bit through joint accounts, credit cards, and things could be a bit more sporadic. So in that case, use this year or two years, depending on when you're joining, if you can to start streamlining your bank transactions, whether that is looking at setting up a metal NatWest business bank account so you know that you can get free agent for free, you know, whether that's using Starlink, if you want to use their business toolkit, and really just use this year as a run-in to get yourself streamlined. So when you get to the point that you need to register for making text digital and you need to start using software, it's going to be really clean to do. But that's it. So for some of you, if you're already using software, the only thing you've got to do is register at HMRC and you're good to go. For those of you who aren't, you've got to add that software bit. For those of you who are smaller, maybe start to look at streamlining your bank transactions. But it shouldn't take too much for the bulk of you to get ready for it. So that's all you need to do. Register for HMRC, set up some software, link your bank accounts, and then just wait until July, and you'll be good to go. So I hope that helps.