Making Tax Digital and your ERP: what UK businesses need to know in 2026
Making Tax Digital (MTD) has changed how UK businesses keep records and report tax to HMRC, and it is still expanding. Here is what it means for your ERP and finance systems in 2026.
MTD for VAT: already mandatory
Since April 2022, all VAT-registered businesses must keep digital VAT records and submit VAT returns to HMRC using MTD-compatible software, whatever their turnover. Data must flow between systems through digital links: copying and pasting figures, or re-typing them from one system into another, is not allowed.
MTD for Income Tax: started April 2026
MTD for Income Tax applies to sole traders and landlords, not limited companies. It is being introduced in stages based on qualifying income from self-employment and property:
| From | Applies to qualifying income over |
|---|---|
| 6 April 2026 | £50,000 |
| 6 April 2027 | £30,000 |
| 6 April 2028 | £20,000 |
Source: HMRC Self Assessment legal framework manual (SALF910). Those in scope must keep digital records and send quarterly updates to HMRC.
What MTD means for your ERP
- Digital links: if your ERP, spreadsheets and VAT software don’t connect digitally, you may not be compliant
- One source of truth: an integrated ERP keeps sales, purchases and VAT in one place, reducing errors
- Audit trail: every transaction should be traceable from the VAT return back to source documents
- Group structures: multi-company businesses need consolidated, accurate VAT reporting
SAP Business One and MTD
SAP Business One keeps the digital VAT records HMRC requires. VAT returns are submitted through an MTD-compatible add-on or bridging software, which a partner like IMTS recommends and sets up as part of your implementation. See our SAP Business One add-ons.
Quick MTD checklist for your business
- Are all VAT records held digitally?
- Do figures move between systems through digital links, with no re-keying?
- Is your VAT submission software on HMRC’s list of compatible software?
- Can you trace each VAT return figure back to source transactions?
- Is anyone in the business, such as directors with property income, affected by MTD for Income Tax?
Not sure your systems are compliant? Our free ERP Doctor health check reviews your ERP, including VAT processes and integrations. Or talk to our London team.
This article is general guidance, not tax advice. Check your obligations with your accountant or HMRC.
Free guide
The UK SAP Business One Buyer’s Guide 2026
Costs, features, Making Tax Digital, choosing a partner and a step-by-step roadmap, in one free 8-page PDF.
