Making tax digital for Small business

Written By Timothy Clark

Making Tax Digital: What It Means for Small Business Owners

Running a small business comes with enough challenges — from managing cash flow to growing your customer base. The last thing you need is added complexity when it comes to taxes. That’s where Making Tax Digital (MTD) comes in.

This UK Government initiative is changing the way businesses manage and submit their taxes — and it’s designed to make your life easier, not harder. At Quest Accounting Services, we help small business owners stay compliant, save time, and take full advantage of the digital tools that simplify bookkeeping and tax reporting.

What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s plan to modernise the UK tax system by requiring businesses to keep digital financial records and submit tax returns using compatible software.

Instead of juggling spreadsheets or piles of paper receipts, MTD brings everything together into one connected digital system — giving you real-time visibility into your finances and reducing costly errors.

Who Needs to Follow MTD Rules?

The rollout of MTD is happening in stages, and it already applies to most small businesses.

1. VAT-Registered Businesses

Since April 2022, all VAT-registered businesses — even those below the £85,000 threshold — must:

  • Keep digital VAT records, and

  • Submit VAT returns via MTD-compatible software (such as Xero, QuickBooks, or Sage).

If you’re still filing VAT returns manually, now is the time to make the switch.

2. Self-Employed Individuals and Landlords

From April 2026, MTD will also apply to:

  • Sole traders and landlords earning over £50,000 per year.
    Then, in April 2027, it will expand to those earning between £30,000 and £50,000.

Instead of one annual Self Assessment, you’ll send quarterly updates to HMRC — giving you a clearer picture of your tax position throughout the year.

How to Get Ready for MTD

Transitioning to MTD doesn’t need to be daunting — especially with the right support. Here’s what Quest Accounting Services recommends for small business owners:

1. Choose the Right Software

We’ll help you select and set up MTD-compatible accounting software such as:

  • QuickBooks Online

  • Xero

  • FreeAgent

  • Sage Business Cloud

These tools automatically track income and expenses, link to your bank, and send your VAT or income tax data directly to HMRC.

2. Keep Digital Records

Digital record-keeping is now a requirement — but it also saves time.
You can scan receipts, upload invoices, and let your accounting software do the rest. No more shoeboxes full of paperwork!

3. Register for MTD

You must register for MTD through your HMRC online account before your next return is due. If you prefer, Quest can handle the entire process for you — from registration to setup.

4. Get Ongoing Support

Once you’re up and running, we’ll provide ongoing support — monthly reconciliations, tax reminders, and digital bookkeeping reviews — so you never miss a deadline or submission.

The Benefits for Small Businesses

Making Tax Digital isn’t just about compliance — it’s about running a smarter, more efficient business.

Here’s how MTD benefits you:

  • Saves time with automated reporting

  • Reduces human error and late-filing penalties

  • Gives real-time insight into profits and cash flow

  • Simplifies collaboration with your accountant

  • Prepares you for future digital tax changes

When your books are up to date and accurate, you can make better business decisions and stay in control of your finances year-round.

How Quest Accounting Services Can Help

At Quest Accounting Services, we understand that every small business is different. Whether you’re a sole trader, freelancer, or limited company, we tailor our support to suit your needs.

We can:

  • Register your business for MTD

  • Set up and integrate cloud accounting software

  • Train you and your team on digital record-keeping

  • Provide ongoing bookkeeping and tax filing services

Our mission is simple — to take the stress out of compliance and give you confidence that your business is HMRC-ready.

Final Thoughts

Making Tax Digital isn’t just a government requirement — it’s an opportunity to simplify your finances, improve accuracy, and save valuable time.

With Quest Accounting Services by your side, you can move confidently into the digital tax era knowing your systems are compliant, your data is secure, and your accounts are in expert hands.

Get Your Business MTD-Ready Today

Let’s take the hassle out of tax.
Contact Quest Accounting Services for a free consultation on setting up Making Tax Digital for your business.

Call us: 012-96688798
Email: questteam@questaccounting.co.uk
Visit: www.questaccounting.co.uk

Timothy Clark
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