At a Glance
From April 2026, UK sole traders and landlords earning over £50,000 must keep digital records and file quarterly returns under Making Tax Digital. In this blog, we discuss how HMRC-compatible software like Microsoft Business Central supports secure submissions, digital links, and compliance features to simplify reporting and meet new requirements.
Making Tax Digital in the UK
Tax rules in the UK are changing. The introduction of HMRC’s Making Tax Digital (MTD) programme is bringing a wave of changes for businesses, in the way they report their earnings and in terms of Value Added Tax or VAT.
Thousands of UK businesses have signed up for MTD as reported by the HMRC. If yours has too, now is the time to get your system ready to make your tax reporting smoother and avoid penalties. Especially if you’re still relying on spreadsheets and/or outdated software to manage your taxes.
With MTD all set to kick off in April 2026 for sole traders and landlords, skip the last-minute scramble and upgrade to Business Central, a Microsoft ERP system that helps your business to stay compliant with the latest digital tax laws.
In this blog, we explore how Business Central’s Making Tax Digital features work and how you can make the most of this ERP to keep up with these digital tax changes.
What Is the 2025 UK Digital Tax Reform?
In July 2025, HMRC published its Transformation Roadmap, laying out a broader version of digital reform. It describes the Government’s vision to use minimal effort for complete tax tasks by simplifying tax processes, and applying more artificial intelligence (AI) and digital ‘self-serve’ options for customers.
What is the New Digital Tax update?
Making Tax Digital, or digital tax, is a core part of the HMRC’s plan to help UK businesses embrace digital tax reporting. Instead of manual entries and paper-based records that result in errors, businesses need to shift to a digital system that records and submits returns directly through a system that links to the HMRC.
From the 6th of April, 2026, sole traders and landlords with a qualifying gross income over £50,000 must use MTD for Income Tax.
In general, under MTD, businesses need to:
Maintain Digital Records
Your business needs to use compatible software to maintain digital records of your financial transactions. All financial data, from income to expenses, needs to be recorded in a digital format, which will help improve the accuracy of tax submissions.
Submit Quarterly (And Monthly) Reporting
MTD brings forth a quarterly (and monthly) reporting system so your business can submit updates to the HMRC. These updates give the HMRC a clear overview of your business’ income and expenses and an idea of your financial standing. This regular reporting also allows you to avoid the end-of-year rush to file tax returns.
Use Compatible Software
To comply with MTD and keep up with future digital tax changes, your business must use software that is compatible with HMRC’s systems. Try choosing an ERP like Business Central that connects directly to HMRC’s digital tax platform and submits records only in an accurate and correct format.
How Business Central Supports Making Tax Digital
Microsoft Business Central includes built-in functionalities that help businesses meet HMRC’s MTD rules easily.
Secure Integration with HMRC API
Business Central connects directly to HMRC’s servers using secure APIs (GovTalk service), so your financial data is always transferred safely and accurately.
Simpler VAT Submission
Your finance team can directly retrieve a list of their VAT obligations, including reporting periods and due dates, from HMRC within Business Central. This helps ensure timely filing and avoids potential penalties. No need to export data or use third-party add-ons. Submit your VAT returns in just a few clicks, without any hassles.
Comply with Digital Links Requirement
Business Central automatically meets HMRC’s requirement for digital links between records, which reduces manual errors.
Group VAT Support
If your company files VAT as a group, Business Central handles multiple legal entities in one system with Group MTD.
Submission History and Tracking
You can view past VAT returns and check the status of current submissions at any time.
Error Validation
Business Central checks your return for common issues before you hit submit, helping you avoid rejected filings.
Ready to Simplify Your Tax Reporting with Brookland Solutions?
With Microsoft Dynamics 365 Business Central, you can report tax and submit VAT without the hassles. It provides you with valuable financial reporting functionalities and automation so your team can stay compliant without worrying about missed deadlines or filing mistakes.
Microsoft Dynamics 365 BC updates as the digital tax laws update, ensuring your business is up-to-date with the compliance requirements, and your finance team can focus on financial planning, budgeting, and supporting your business growth.
As your Business Central implementation and customisation partner, Brookland Solutions can integrate the MTD features so that you file VAT returns with all data linked, calculated, and recorded for audits. Save time and reduce manual effort in tax reporting with this powerful ERP solution.
Contact us today for a demo to learn how you can prepare for the upcoming digital tax changes and simplify tax processes.
