How does an accountant help with Making Tax Digital?

Making Tax Digital (MTD) is one of the most significant changes to the UK tax system in decades. It requires businesses and individuals to keep digital records and submit tax returns using approved software. While the aim is to simplify tax administration, the shift can be confusing and time consuming for many business owners. This is where an accountant’s expertise becomes invaluable. This article explains how accountants help businesses and self employed individuals adapt to Making Tax Digital and stay fully compliant with HMRC.

Making Tax Digital is a government initiative designed to modernise how tax information is reported to HMRC. It began with VAT and is gradually expanding to include Income Tax and Corporation Tax. The goal is to reduce errors, improve accuracy, and make tax administration more efficient through digital record keeping.

For many small businesses, freelancers, and landlords, MTD has changed how taxes are recorded and submitted. Accountants play a central role in managing this transition and ensuring that every requirement is met correctly and on time.

Understanding Making Tax Digital

Making Tax Digital currently applies to:

  • VAT: All VAT registered businesses must now keep digital records and file VAT returns using MTD compatible software.

  • Income Tax: MTD for Income Tax Self Assessment (ITSA) will apply to self employed individuals and landlords earning over £50,000 from April 2026.

  • Corporation Tax: MTD for Corporation Tax is expected to follow in future, though no start date has been confirmed.

Under MTD, businesses must keep digital records of all financial transactions and use software that connects directly to HMRC’s systems. Paper ledgers and manual entry on HMRC’s old portal are no longer acceptable for VAT returns.

How accountants support businesses with MTD

1. Helping you choose the right digital accounting software

An accountant assesses your business needs and recommends software that meets MTD requirements and integrates smoothly with your operations. Popular options include Xero, QuickBooks, FreeAgent, and Sage.

They help set up your software, link it to your HMRC account, and ensure it captures all relevant financial data automatically. This reduces manual input errors and saves valuable time.

2. Setting up digital record keeping

One of the biggest changes under MTD is the requirement to maintain digital records of all income and expenses. Accountants guide you through the process of:

  • Recording invoices, receipts, and transactions digitally.

  • Using bank feeds for automatic transaction imports.

  • Creating digital audit trails for VAT and tax records.

They ensure your system complies fully with HMRC’s rules, giving you peace of mind during future tax audits.

3. Managing digital VAT submissions

Accountants ensure that your VAT returns are submitted correctly through MTD compliant software. They prepare, review, and file each return on your behalf, checking for errors or inconsistencies before submission.

This prevents costly mistakes that can trigger penalties or investigations. If HMRC updates its submission formats or requirements, your accountant ensures your system remains compatible.

4. Bridging software for non digital systems

If you use legacy or bespoke software that cannot link directly to HMRC, your accountant can install bridging software. This tool allows you to transfer figures securely from your existing records into HMRC’s MTD platform without switching systems entirely.

It provides a cost effective way to stay compliant while maintaining familiar workflows.

5. Ensuring compliance and avoiding penalties

MTD compliance involves more than just filing returns digitally. Businesses must maintain accurate, ongoing digital records that show how each figure on the return was calculated.

Accountants conduct regular reviews to ensure your record keeping is consistent and compliant. They also remind you of filing deadlines and handle submissions to avoid late penalties.

6. Training and ongoing support

Transitioning to MTD can be daunting for business owners who are used to paper-based or spreadsheet accounting. Accountants provide practical training for you and your staff on how to use new systems effectively.

They also offer ongoing support whenever you need help with VAT queries, software updates, or changes in HMRC requirements.

7. Integrating MTD with wider business accounting

MTD does not exist in isolation. It affects your entire accounting process. Accountants help integrate MTD software with your broader financial management, covering areas like payroll, expenses, and cash flow.

This integration creates a more accurate financial picture and helps you make informed business decisions.

8. Preparing for MTD for Income Tax

For self employed individuals and landlords, MTD for Income Tax will replace annual Self Assessment returns with quarterly digital submissions. Accountants help prepare for this shift by setting up systems that track income and expenses continuously.

They also advise on:

  • Structuring records for property and business income.

  • Managing quarterly updates to HMRC.

  • Planning for tax payments based on real time figures.

Preparing early reduces the risk of compliance problems when MTD for Income Tax becomes mandatory.

9. Handling MTD for Corporation Tax in future

Although MTD for Corporation Tax is not yet active, accountants are already helping companies prepare. They ensure corporate record keeping aligns with digital reporting standards and that accounting software can be adapted when the scheme launches.

This proactive approach avoids last minute disruptions when new rules take effect.

10. Reducing the risk of HMRC errors and investigations

Under MTD, data flows automatically from your accounting software to HMRC. While this improves accuracy, it also means that errors in your records will transfer instantly to HMRC.

Accountants perform checks before submission, correcting anomalies or reconciling accounts to prevent problems. Their oversight significantly reduces the likelihood of HMRC queries or compliance reviews.

Example in practice

A small design agency using spreadsheets for bookkeeping struggled to adapt when MTD for VAT became mandatory. Their accountant introduced Xero, imported historical data, and linked it directly to HMRC. They also trained the agency owner to record expenses digitally using a mobile app.

Within one quarter, the VAT submission process took minutes instead of hours, and errors were eliminated. The accountant now monitors quarterly returns and keeps the firm fully MTD compliant.

Benefits of working with an accountant for MTD

  • Time savings: Automation reduces administrative workload.

  • Accuracy: Accountants review data and eliminate errors before submission.

  • Compliance: Digital systems stay aligned with HMRC requirements.

  • Tax efficiency: Real time financial data helps identify deductible expenses.

  • Peace of mind: Professional oversight reduces risk of fines or investigations.

How to prepare for MTD with your accountant

If you are new to Making Tax Digital, take the following steps with your accountant:

  1. Review your current record keeping system.

  2. Choose and set up suitable accounting software.

  3. Register your business for MTD with HMRC.

  4. Link your software to your HMRC account.

  5. Train staff and test your first digital submission.

Your accountant will manage most of this process for you and provide guidance tailored to your business size and structure.

Conclusion

Making Tax Digital marks a major change in how taxes are managed in the UK, but it does not need to be stressful. An accountant ensures you choose the right software, maintain compliant records, and submit accurate returns on time.

With professional support, you can meet all MTD requirements, reduce errors, and gain real time financial visibility that helps your business run more efficiently and confidently.