Making Tax Digital (MTD) is HMRC’s initiative to digitise the UK’s tax system, making it easier for taxpayers to manage their obligations while reducing administrative errors. It requires businesses and individuals to keep digital records and submit updates using compatible software, rather than relying on paper-based methods.
MTD is therefore part of the UK government’s effort to create a more modern, digital-first tax system. It shifts the work of tax reporting from manual processes to digital tools, where records are stored electronically and submissions are made via software that connects directly to HMRC’s systems.
The core idea is to automate much of the tax process, helping to close the “tax gap” caused by errors or underreporting. It’s not a new tax but a change in how existing taxes are handled.
While it promises efficiency gains, some evidence suggests mixed results in practice, with benefits like fewer errors not always realised for all users. MTD has been rolled out in phases, starting with VAT, and plans for Income Tax are underway, but Corporation Tax extensions were canceled in 2025.
Find out more from https://sovos.com/vat/tax-rules/uk-making-tax-digital/