Making tax digital
Everything you need to know about the UK Government’s new initiative to bring income recording and tax returns into the digital age.
What is Making Tax Digital (MTD)?
The UK Government is modernising the tax system through a new initiative called Making Tax Digital (MTD). Business owners will be required to use an MTD approved software provider to:
- Keep digital records of their income and expenses
- Submit quarterly updates online
- Complete a final declaration on an annual basis
When does it come into effect?
The MTD initiative was first announced in 2015, with the aim of gradually moving all UK taxes into a fully digital system. The first phase applied to VAT-registered businesses, who were required to comply by April 2022. The next stages apply to sole traders and landlords, with more taxes expected to transition to the digital system in the future.
Who does MTD apply to?
VAT registered schools
If your dance school is VAT registered, you already need to keep VAT records digitally and submit VAT returns using MTD-compatible software. (This requirement has been in place since April 2022).
Self-employed sole traders
MTD for income tax (e.g. Independant Dance Teachers) is being rolled out in phases depending on your income as follows:
- April 2027 – If your income is over £50,000 per year from your self-employed activities
- April 2028 – If your income is over £30,000 per year from your self-employed activities
- April 2029 – If your income is over £20,000 per year from your self-employed activities
What about limited companies?
Limited companies are not currently required to join MTD for Corporation tax as yet, but HMRC is expected to phase this in after the personal income and VAT stages.
Are there any exemptions?
A small number of businesses may be exempt if:
- It’s impossible to use digital tools due to disability/age
- You have no reliable internet access
- Your business is subject to insolvency procedures
Exemptions must be requested and approved by HMRC. Find out more here: Gov.uk/MTDexemptions
How will MTD benefit me?
By moving everything online, MTD aims to make managing tax simpler, more accurate, and more efficient for business owners.
Digital records mean:
- Fewer mistakes
- Less paperwork
- A lower risk of missed deadlines and unexpected tax bills
Submitting updates quarterly also gives you a clearer picture of how your business is performing throughout the year, rather than waiting until the end of it.
Overall, MTD is designed to give business owners better visibility, more control, and a smoother, more reliable way to handle their finances.
What do I need to do?
1. Keep financial records digitally
This includes income, expenses and payments received
2. Use MTD-compatible software
There is a vast choice of approved software providers on the gov.uk website, but we recommend Xero or Quickbooks
3. Submit quarterly updates
Instead of one annual self-assessment tax return, you’ll upload shorter digital updates every three months.
4. Confirm an End-of-Period-Statement (EOPS)
This replaces the traditional annual tax return.
How do I find the right software?
HMRC maintains a full list of compatible solutions, but the most widely adopted and reliable options for small businesses – and the ones we recommend – are:
- Xero
- QuickBooks Online
Both are fully MTD-compatible for VAT and will be compatible for Income Tax submissions when HMRC opens the service.
Where does Membermeister fit into this?
Membermeister is the perfect solution for managing your dance school admin and billing. From class timetables, to online registrations, registers to communications and lots more.
It’s the best way for you to manage everything in one place including your digital record-keeping for:
- Class fees
- Invoices
- Payment tracking
- GoCardless and Stripe payments
- Cash/bank transfer payment logs
This means you have the core digital records you need for MTD – you just need compatible accounting software for the final submission step.
We’ve built dedicated export tools that allow you to download all your financial data in a format that is perfectly compatible with Xero and QuickBooks. Just click the links below and follow the help guide:
Sam Smith FCCA, Smith & Co Accountants
Sam Smith FCCA, Smith & Co Accountants
Need help?
Membermeister’s been in partnership with Sam from Smith & Co Chartered Certified Accountants for many years.
He specialises in dance, performing arts and theatre schools and recommends Membermeister to every single client. With so many mutual customers, it made sense for us to work together to provide software to the industry that meets their financial and accounting needs.
We would highly recommend that you discuss your MTD obligations with an accountant who can ensure everything is set up correctly, you’re recording of income is accurate, that you submit updates timely and can advise you of any exemptions applicable to you.
Simply click the link below and submit the contact form and Sam will reach out to you.
Our partners
Since 2012, Membermeister has provided amazingly simple, time-saving software to dance, performing arts and theatre schools across the UK. They pride themselves on the highest levels of customer service and a platform that continues to adapt and grow to meet the needs of their customers. Register now for future updates.
Smith & Co are a chartered certified accountancy practice with clients across the whole of the UK. They deliver first class accounting, tax, compliance, payroll and advisory services and they specialise in the dance and arts industry.
Helpful links
Find a chartered accountant or firm:
https://find.icaew.com
https://www.icas.com/members-membership/find-a-ca
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