Introduction:
Making Tax Digital (MTD) is HMRC’s initiative to digitise the UK tax system, requiring all VAT-registered businesses including SMEs in St Albans, Harpenden, and Hertfordshire to keep digital records and submit VAT returns using approved software from April 2025. This move eliminates manual spreadsheets and paper records, ensuring greater accuracy, real-time submissions, and reduced risk of penalties for late or incorrect filings.
At Carter Bookkeeping Services led by Wendy Carter and based in St Albans and Harpenden, we’ve helped businesses adapt for MTD through digital bookkeeping setup, VAT disbursements management, and compliance checks. Read on for a complete guide on how to approach MTD in 2025 and why trusted advisors like us are so essential.
What is Making Tax Digital (MTD)?
MTD is HMRC’s strategy to digitise the UK tax system. Starting earlier for VAT, it has since expanded to include Income Tax for landlords and sole traders. From April 2025, most VAT-registered businesses (turnover over £90,000) including SMEs in St Albans must comply using compatible software.
Why It Matters
- No more manual spreadsheets or PDF uploads; you’ll send VAT returns digitally in real-time.
- Enhanced accuracy through automated data entries and instant error checks.
- HMRC access to real-time financial snapshots helping you stay compliant and avoid penalties.
What’s Coming Next: MTD for Income Tax?
MTD is coming in April 2026 for sole traders and landlords with a combined turnover of £50k and over. From April 2026 HMRC will require sole traders and landlords to comply if their turnover is £30k and over.
Key reminders:
- Voluntary VAT registration can offer advantages such as the ability to reclaim input VAT on business expenses but it also comes with added responsibilities, including more complex admin and mandatory digital record-keeping under MTD rules.
- HMRC penalties apply for late or inaccurate VAT returns so being VAT on disbursements compliant is critical.
Preparing Your Business for MTD
Choose MTD Compatible Software
HMRC requires digital links for data. Popular options include:
- Xero (ideal for integrating Shopify, Amazon, and payment apps)
- QuickBooks Online
- FreeAgent, and others.
We help with bookkeeping setup and bookkeeping health check services to ensure everything is correctly configured.
- Digitise Your Records
- Replace manual entries with digital invoices, receipts, and bank feeds.
- Digitally scan disbursement invoice documents and reverse charge VAT invoice example transactions.
- Ensure consistent capture of VAT disbursements (e.g., courier fees, solicitor costs).
- Bookkeeping Reviews & MTD Readiness for Your Business
At Carter Bookkeeping Services, we provide tailored bookkeeping review services and Making Tax Digital (MTD) readiness checks for SMEs in St Albans, Harpenden, and Hertfordshire. Whether you’re a sole trader, e-commerce brand, or growing local business, we ensure your systems, processes, and records meet HMRC requirements keeping you fully compliant and confident ahead of every VAT return deadline.
Key Areas SMEs Need to Focus On
A.VAT on Disbursements & Reverse Charges
- MTD requires separate and accurate tracking of VAT on disbursements, including solicitor fees and other pass-through expenses.
- For reverse charge VAT invoices, ensure your invoice clearly displays the correct VAT obligations. Incorrect formatting or missing details could trigger HMRC audits.
B. Timing & Reporting
- MTD VAT returns are typically quarterly. But if your business is part time services or seasonal, flexibility is possible.
- Reporting deadlines are firm: use tools for reminders and automated submission.
C.Data Accuracy & HMRC Audits
- Error rates are scrutinised. Manual systems risk error; digital accounting reduces the risk of mistakes and penalties.
- We perform a holistic bookkeeping review before every MTD submission to catch any issues early.
Why SMEs in St Albans Should Trust Carter Bookkeeping
Local Expertise
We’re rooted in St Albans, Harpenden, and Hertfordshire. We understand local small business challenges from managing VAT returns Hertfordshire-wide to helping sole traders with tax guide for sole traders UK and UK sole trader tax band planning
Specialist Services
- Bookkeeping services St Albans tailored to MTD
- Advertising bookkeeping services for marketing-based expenses
- Part time bookkeeping services for SMEs and growing startups
- Bookkeeping & accounting services Hertfordshire including VAT & self-assessment
Trusted Credentials
- Carter accountants St Albans with extensive experience
- In-depth bookkeeping FAQ and support from Wendy Carter and team
- Client testimonials praising our VAT compliance, timely filings, and business growth support
MTD Readiness Checklist for 2025
Step | Task | Why It Matters |
|---|---|---|
1 | Choose MTD-compliant software | HMRC approved and automates submissions |
2 | Configure workflows & chart of accounts | Ensures accurate VAT, disbursement, and reverse charge tracking |
3 | Digitise invoices and receipts | Paper records alone won’t cut it |
4 | Automate bank feeds | Reduces manual error and saves time |
5 | Train staff or hire a bookkeeper | Familiarity saves headaches during audits |
6 | Run internal bookkeeping reviews | A proactive fix for any compliance risk |
7 | Schedule quarterly VAT returns | Stay ahead with no deadline stress |
8 | Keep records for 6 years | HMRC requires retention- We advise how long should you keep your tax documents |
Common SME Concerns (Answered)
Q1: What about sole traders?
MTD applies if VAT-registered. We guide based on sole trader tax brackets UK, UK sole trader tax band, and MTD thresholds.
Q2: Is voluntary VAT registration worth it?
Often yes, if you incur significant VAT-deductible expenses. We walk you through advantage voluntary VAT registration vs disadvantage voluntary VAT registration and help you decide.
Q3: What happens if I miss a deadline?
Penalties, interest, and compliance scrutiny. We’ll show you how to use bookkeeping health check service to stay audit ready.
Q4: How do I handle VAT disbursements and domestic reverse charges?
Our bookkeeping review services ensure your invoicing—such as disbursement invoice entries is HMRC compliant.
The Strategic Value of MTD-Ready Accounting
- Real-time data lets you make smarter decisions especially around pricing, margins, and VAT recovery
- Improved cash flow transparency through timely VAT reimbursements
- Professional credibility all backed by carter business services and carter business solutions
Book Now: Contact Carter Bookkeeping
We’re ready to support your MTD journey in St Albans, Harpenden, Hertfordshire, and London. Let us tailor a solution, whether you’re a sole trader needing financial confidence for sole traders, a startup, or a growing SME.
Contact us today to schedule your free VAT and health check and find out how Carter Bookkeeping can help your business thrive in 2025 and beyond.
📞 07903 364040 | ✉️ wendy@carterbookkeepingservices.co.uk
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