Making Tax Digital: What You Need to Know

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's programme to modernise the UK tax system. It requires businesses to keep digital records and submit tax returns using MTD-compatible software, replacing paper-based and manual processes.

MTD for VAT has been mandatory since April 2022 for all VAT-registered businesses. MTD for Income Tax Self Assessment (MTD for ITSA) is being rolled out from April 2026 for sole traders and landlords with qualifying income over £50,000.

MTD Timeline

Who Must Comply with MTD?

If you fall into any of these categories, MTD applies to you:

• VAT-registered businesses — All VAT-registered sole traders, partnerships, and limited companies must file VAT returns digitally
• Sole traders earning over £50,000 — From April 2026, quarterly digital updates to HMRC are required
• Landlords earning over £50,000 — Property income falls under MTD for ITSA
• Partnerships — General partnerships will be brought into MTD for ITSA (date TBC)

How ComptaFlow UK Meets MTD Requirements

ComptaFlow UK is designed from the ground up to help UK businesses maintain MTD-compliant digital records directly within WordPress.

📝 Digital Record-Keeping

Every transaction you enter — income, expenses, sales, purchases — is stored digitally in your WordPress database with the required details: date, amount, VAT rate, nominal code, and description. This satisfies HMRC's requirement for "functional compatible software".

All your sales records stored digitally with full audit trail

📊 Automatic VAT Calculations

ComptaFlow UK automatically calculates your Output VAT (on sales) and Input VAT (on purchases) for every transaction. At the end of each quarter, your VAT Return is pre-calculated with the exact figures you need to submit to HMRC.

Quarterly VAT Return automatically calculated — ready to submit to HMRC

🔍 HMRC-Ready Audit Trail

The Audit Trail export generates a complete, chronological record of every journal entry in your accounts. This is the file HMRC may request during a tax inspection — and ComptaFlow UK produces it at the click of a button.

One-click exports: Audit Trail, Trial Balance, General Ledger, Journal, P&L

🏢 All VAT Schemes Supported

Whether you're on the Standard VAT scheme, Flat Rate Scheme, Annual Accounting Scheme, or Cash Accounting — ComptaFlow UK handles them all. Simply configure your scheme in Settings and the plugin adapts all calculations accordingly.

VAT Return submitted — tracked and recorded for your records

MTD Compliance Checklist

Use this checklist to ensure your business is MTD-ready:

• Keep digital records of all sales and purchases (not just paper receipts)
• Record the date, amount, and VAT rate for every transaction
• Use compatible software to store records (not just spreadsheets)
• Submit VAT returns digitally through your software or HMRC's online portal
• Maintain records for at least 6 years (HMRC requirement)
• Ensure "digital links" between all parts of your record-keeping system
• Back up your records regularly

Penalties for Non-Compliance

HMRC's points-based penalty system means late submissions and failures to keep digital records can result in escalating fines. For each missed quarterly deadline, you receive a penalty point. Once you reach the threshold (4 points for quarterly filers), a £200 penalty is applied — and for each subsequent late submission.

Avoid penalties by keeping your records up to date and submitting on time. ComptaFlow UK's dashboard shows you your current VAT period and upcoming deadlines.