Making Tax Digital: answering more of your questions

Making Tax Digital comes into effect in April 2026, and we understand for many, this new digital shift can be daunting and will raise a number of questions.

We recently hosted the second in a series of three Making Tax Digital webinars alongside our partners at Xero. During this session, we covered what Making Tax Digital is and the key requirements you need to meet, along with the important deadlines to keep on your radar.

We also explored how to choose the right software with help from Xero, and cleared up some of the most common misconceptions about Making Tax Digital, ensuring you can move forward with confidence.

During the session, participants asked a fantastic range of questions, so we’ve pulled together some clear, straightforward answers to help you feel confident about what Making Tax Digital means for you and your business.

Who does Making Tax Digital apply to?

We answer your questions about who does- and who does not- need to register for MTD by April 2026.

Q: If someone earns more than £50k in 2024/25 but then earns under £50k in both 2025/26 and 2026/27, would they still be required to use MTD?

If your qualifying income is over £50,000 in 2024/25 and then drops below the threshold in later years, you’ll still need to keep submitting MTD updates until your income has stayed below the threshold for three years in a row.

The only time you can stop sooner is if that income source ends completely. In that case, you can simply let HMRC know through your tax account, and you won’t need to send any more updates going forward.

Q: Does Making Tax Digital apply to Limited Companies and/or its directors?

No, Making Tax Digital does not currently apply to Limited Companies or their directors. However, if the directors have sole trader or landlord income that does not relate to the Limited Company, they would then be required to register for MTD if this income meets the threshold. This would be treated as separate from the company.

Making Tax Digital for landlords

We answer questions from landlords about how to navigate MTD based on circumstances such as joint ownership, foreign property, and using a personal account

 Q: I am a UK landlord with foreign property income. How can I submit my foreign incomes quarterly with MTD?

This works very similarly to UK‑based property for MTD, but it would need to be set up as a separate update from your existing UK property details. Platforms such as Xero can support this, but every situation is a little different, so we’d be more than happy to talk it through with you and make sure everything is set up just right.

Q: How should I manage MTD as a private landlord when my mortgage payments are made from a personal account?

You can still keep digital records even if your expenses & income are being paid/sent to your personal bank account. If you are receiving personally, this is where you’d manually create records in your MTD software (such as Xero) to allow you to deduct your allowable expenses from your MTD income.

If your accountant is creating these records for you, it really helps to share a list of any rental income or expenses that have gone through your personal account. Otherwise, they may not have full visibility of everything that needs to be included.

If it’s easy and practical for you, we’d also suggest setting up a separate bank account to manage your property income and costs: it can make things much simpler, but we completely understand that this isn’t the right option for everyone.

Q: How do you navigate organising tax for joint properties where one owner does not meet the threshold for MTD?

As a joint owner of the property, only the owner who qualifies for MTD will have to comply. You will find that MTD-compliant software can help you to manage this. You can use tracking to ensure that only your share of the income and expenses is included in the updates you submit, and nothing more. 

If the other owner is likely to fall under MTD rules in the future, it may be worth considering opting in early so that both of you follow the same process from the start, but that’s completely up to what works best for your situation. 

Q: If I use Xero, how will it capture management costs from my letting agent? 

AI data extraction takes care of this automatically for you. You’ll simply record the gross rent as income and the management fee as an expense, so the net amount lines up with the cash that arrives in your account.

Using MTD-compliant software

In our webinar we walked through the capabilities of a MTD compliant software, what factors make software compliant vs non-compliant, and how bridging software could be incorporated.

Q: I pay for diesel on a company credit card; do I have to scan every individual till receipt? 

You don’t need to upload every single paper receipt to stay compliant with the new requirements; as long as you’ve created a digital record that shows the date, amount, vendor and category of the purchase, you’re meeting the rules. 

Scanning receipts is still helpful though: it means your accountant can instantly see everything they need in your software without having to chase you for documents later. 

If your company is VAT‑registered and reclaiming VAT on expenses, then we’d recommend using a mobile app to capture and send receipts straight into your accounting system. Having those digital copies ready to go can make things much smoother if HMRC ever requests more detail or carries out a review. 

Q: Can I use MTD software to automate tasks – such as importing Airbnb/agent statements – to handle complex VAT and fees?

To achieve this, you can use third-party apps (like A2X or Synder) that act as a bridge. They pull the “gross” data, fees, and VAT from Airbnb/Channel Managers and post them into software such as Xero as clean summaries. 

Q: Can I key my data into MTD compliant software directly? I don’t want to connect my bank accounts. 

Yes, you can. While bank feeds are the “gold standard” for speed, you can manually enter transactions or import CSV files of your statements if you prefer not to use a live connection.

Q: What other software- besides Xero- could we use for MTD? 

There are plenty of good alternatives to Xero, and you’ll find them listed on HMRC’s approved software list. Whatever option you choose, it will need to link with HMRC digitally, capture and store income and expenses and it also needs to be able to correct digital records from previous periods. We recommend discussing the specifics of your circumstances with us to ensure you are selecting the right software for your business.

Q: Is it correct that spreadsheets alone wouldn’t be sufficient under MTD?

A: This is correct- spreadsheets on their own aren’t enough to comply with MTD. 

To be MTD‑compliant, your software needs to: 

• Link with HMRC digitally 

• Capture and store income and expenses 

• Allow you to correct digital records from previous periods 

Q. HMRC states spreadsheets are allowable with bridging software. How would this work? 

Bridging software can be a great option if you want to keep using your existing spreadsheets or accounting tools. It connects your current records to HMRC so you can submit everything digitally, without changing your whole system. 

There are several compliant bridging tools available, but the best choice really depends on your setup. We’d recommend speaking with us first so we can help you decide what will work best for your business. 

Q: What bridging software will be available for smaller clients that do not want to use Xero or similar platforms? 

There are lots of bridging software options out there, we’ve chosen to use the version developed by CCH. Every business is a little different though, so it’s always worth chatting through your setup with us. We can look at your situation and point you in the right direction.