VC Process and Best Practices
Read our guide to the venture capital process and best practices, for both VC investors and startups looking for funding.
As a business owner in the UK, watch out for Making Tax Digital (MTD) deadlines to avoid penalties. Missing a deadline can have financial consequences on your business. In this article, we discuss the MTD deadlines and inform you of the impact the MTD will have on business owners and self-employed people in the UK.
We will also discuss Wise Business as a great business account for companies with customers and employees in the UK and internationally, with a useful multi-currency account that lets you access 40+ currencies, with low fees and the mid-market exchange rate. Keep reading to learn more about how Wise can help.
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Just like its name Making Tax Digital (MTD) is taking tax online, where it belongs. It removes the paper trails and error prone manual processes. Businesses and self-employed individuals can now log their records digitally and use smart software to handle tax returns.
Think of MTD-compatible software as your personal tax sidekick. It crunches the numbers, keeps His Majesty's Revenue and Customs (HMRC) happy, and frees up your time to focus on what really matters — like growing your business.
MTD is mandatory if you check any of these boxes:
For income tax, MTD kicks in if:
If you're a business or an individual ready to start your digital tax journey, here's everything you need:
It’s important to keep track of MTD deadlines to avoid penalties. Here are the dates you need to know:
Compliance with Making Tax Digital VAT deadlines is crucial for businesses to avoid penalties and ensure their VAT processes align with the latest government regulations. The VAT MTD deadline was first introduced on April 1, 2019 for businesses with a previously suggested taxable turnover of over 85,000 GBP.
In April 2021, digital links became a must for MTD for VAT. What did this look like? This means your data needs to be integrated seamlessly between MTD compatible software.
In April 2022, the government mandated all VAT-registered businesses, regardless of size of turnover, to comply with MTD for VAT (As of 1 April 2024 the VAT threshold is 90,000 GBP).
Now that MTD for VAT is fully operational there’s no more a MTD VAT deadline to adhere to, instead businesses must:
The next MTD deadline is April 6, 2026. If you’re a sole trader or have property income with an annual qualifying gross income of over 50,000 GBP, you must comply with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) before then.
While individuals with qualifying income greater than 30,000 GBP annually will have to comply with the income tax MTD directive in April 2027.
Qualifying income doesn't include other incomes such as salaries from Pay As You Earn (PAYE) jobs, pension income, and dividends from investments. For example, if you earn 40,000 GBP through PAYE employment and 20,000 GBP as property owner, you don’t need to comply and should continue to submit a Self Assessment Tax Return every year.
While if you earn 40,000 GBP as a sole trader, and 20,000 GBP as a landlord, you will need to be in scope from April 2026.² Similar to MTD for VAT, MTD for Income Tax is expected to roll out gradually over several years.
You need to choose MTD-compatible software to stay compliant. There are different kinds of software on the market and here are some great examples:
Check our Zoho Expense overview article here
Read our complete Quickbooks Review here
For a full list of MTD-compatible software, visit the HMRC directory.
There are penalties for missing the MTD deadline for ITSA depending on the severity and how many times this has happened. Under the penalty system for voluntary participants in MTD for ITSA, penalties will shift to a points-based approach.
How the points system works:
For every missed submission or deadline, HMRC will subtract one point from your account. For each point, you will get a notification.
You will be fined 200 GBP after accruing two points, which is the 'penalty threshold'.
You can avoid late payment penalties by arranging a "Time to Pay" agreement with HMRC within 15 days of the deadline and adhering to its terms. HMRC can waive penalties in cases of special circumstances, such as serious illness or bereavement.
Yes, you can apply to get exempt from MTD. This can be due to it not being reasonable or practical for you to use computers, software or the internet to comply with rules for Making Tax Digital for VAT.³
This can be due to:
These reasons also apply for exemptions for income tax. Exemption cases are considered on a case by case basis.
Yes, with the data link stipulation of the MTD you can still use spreadsheets if you add VAT inputs and outputs using formulas to calculate totals. Provided your spreadsheet will log returns to HMRC using an MTD-compatible software.
Wise Business can help UK businesses, freelancers and sole traders to manage finances across multiple currencies, with low fees and the mid-market exchange rate.
Wise Business account connects with Xero, QuickBooks, FreeAgent, FreshBooks and more solutions to help you seamlessly manage your finances across borders.
When you open a Wise Business account, you’ll benefit from all of these useful features:
Get started with Wise Business 🚀
A key to being compliant with MTD is using compatible software and being aware of deadlines. Start your MTD research journey with this guide as you try to stay compliant and grow your business.
Sources used in this article
Sources last checked January 29, 2025
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.
We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
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