Making Tax Digital (MTD) is a UK government initiative designed to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. But what does that mean in practice—and how can PixieBooks help?
Let’s break it down.
The goal of Making Tax Digital
The UK tax system has long relied on paper records, manual calculations, and once-a-year tax returns. MTD aims to modernise that by:
- Digitising tax records
- Reducing errors
- Encouraging real-time reporting
- Improving productivity for businesses and agents
HMRC’s vision is that tax becomes more integrated into day-to-day business processes—without the scramble and stress of year-end.
Who does Making Tax Digital apply to?
HMRC is rolling out MTD in stages, starting with VAT:
- MTD for VAT: If you’re VAT registered, you must keep digital records and submit VAT returns using MTD-compatible software.
- MTD for Income Tax (coming soon): From April 2026, self-employed individuals and landlords earning over £50,000 will need to follow MTD rules.
- MTD for Corporation Tax: Still in development, with no fixed implementation date yet.
So, if you’re VAT registered or will soon fall under income tax rules, MTD affects you.
What does MTD actually require?
To comply with MTD, you’ll need to:
- Keep digital records
Spreadsheets, cloud accounting software, or MTD apps are acceptable—as long as they’re digital and accurate. - Use MTD-compatible software
That means software that can talk directly to HMRC’s systems. - Submit returns through that software
Manual retyping into HMRC’s website isn’t enough. It has to be a digital link from your records to the final return.
How PixieBooks helps
PixieBooks makes MTD compliance painless.
- Capture receipts via WhatsApp
Just snap and send. No scanning, no email chains, no apps to install. - Automatic extraction and categorisation
Our software pulls out key details like dates, amounts, and tax rates—ready for review. - Seamless Xero integration
Push approved items straight into Xero, which handles MTD submissions to HMRC.
In short, PixieBooks fits naturally into your workflow and supports your journey to MTD compliance—without the faff.
TL;DR: MTD in 30 seconds
- MTD is HMRC’s plan to digitise tax reporting.
- It applies to VAT now, income tax soon, and eventually corporation tax.
- You need to keep digital records and submit returns via MTD-compatible software.
- PixieBooks makes it easy by digitising your paperwork and syncing with Xero.
Got questions?
We’re here to help. If you’re unsure whether MTD applies to you or how PixieBooks can support your business, just get in touch.
