What is Making Tax Digital (MTD)?

MTD is HMRC’s programme for digital records and filing using compatible software. VAT-registered businesses must follow MTD for VAT rules; other taxes such as Income Tax are phased in separately—see GOV.UK for the latest.

Do I need cloud accounting software for MTD?

For MTD for VAT you must use software that can keep digital VAT records and submit returns in the required way, unless HMRC allows a specific exception. HMRC lists compatible products on GOV.UK—cloud accounting is common but not mandatory by name.

What is a year-end in accounting?

The year-end is the date your financial year closes. Companies often align with the tax year or a chosen accounting reference date; it drives when you prepare statutory accounts and Corporation Tax.

Last updated: 2026-03-17

UK accounting basics & Making Tax Digital (MTD)

Solid books make tax filings and decisions easier. This guide outlines core ideas—record-keeping, reporting cycles, and MTD—in plain English. Always confirm current requirements on GOV.UK and with HMRC or your adviser.

Core building blocks

Most UK businesses track money in (sales), money out (purchases and expenses), and obligations (VAT, PAYE, Corporation Tax). Accounting software helps categorise transactions, reconcile the bank, and produce reports—but the underlying discipline is keeping complete, timely records.

Year-end and reporting

After your accounting year ends, you typically:

Close the books (adjustments, accruals, depreciation where relevant).
Prepare statutory accounts if you are a company.
File tax returns—Corporation Tax or Self Assessment depending on structure.

Dates depend on your company year or tax year; missing deadlines can mean penalties.

Making Tax Digital (MTD)

MTD for VAT: VAT-registered businesses must keep digital VAT records and file VAT returns under MTD rules using compatible software (or bridging software where allowed). Overview: Making Tax Digital for VAT.

MTD for Income Tax: being introduced for Income Tax Self Assessment from 6 April 2026 in stages, using qualifying income thresholds (£50,000 then £30,000 then £20,000 mandation steps—see GOV.UK). Read our MTD for Income Tax guide and HMRC’s Use Making Tax Digital for Income Tax.

MTD does not replace the need for accurate supplier and bank reconciliation—if anything, consistent digital processes matter more.

Bank feeds and reconciliation

Cloud tools often import bank transactions automatically. Reconciliation means matching those lines to invoices, bills, and receipts so the ledger reflects reality. Supplier statements and emails still need to be checked—especially where amounts or VAT do not match.

Disclaimer

Not tax or accounting advice. MTD rules and thresholds change—verify with HMRC or your adviser.