Making Tax Digital (MTD) has been rolling out in phases since 2019, and by now most VAT-registered businesses are required to keep digital records and submit returns through compatible software. Income Tax Self Assessment is next, with requirements coming in from April 2026 for self-employed individuals and landlords earning over £50,000.
For many business owners, the question isn't whether they need to comply, but what they actually need to do it properly. The overlap with GDPR makes things more complicated, because storing financial records digitally means you're almost certainly handling personal data that needs protecting.
Here's a practical guide to the hardware, software and processes your business needs for MTD compliance, while keeping your data secure.
What Making Tax Digital Actually Means
In simple terms, MTD requires businesses to keep digital records and submit tax returns using HMRC-approved software. Paper records and disconnected spreadsheets are no longer acceptable for VAT purposes, and the same will apply to Income Tax from April 2026.
No Longer Acceptable
- Paper invoices and receipts only
- Manual spreadsheets not linked to software
- Submitting VAT returns via the HMRC website
- Keeping records in notebooks or filing cabinets
What You Need
- MTD-compatible accounting software
- Digital record keeping from day one
- Direct submission to HMRC via API
- Secure storage with proper backups
Where GDPR Comes In
Here's what catches many businesses out: the moment you store financial records digitally, you're almost certainly processing personal data. Customer names, addresses, payment details, employee payroll information, all of it falls under GDPR.
GDPR requires you to keep personal data secure, protect it from unauthorised access, and only retain it for as long as necessary. You also need to be able to demonstrate that you have appropriate technical and organisational measures in place. In other words, you can't just install some accounting software and hope for the best.
The Hardware You Should Have in Place
To meet both MTD and GDPR requirements, your hardware needs to be reliable and secure. Consumer-grade equipment often lacks the security features needed for handling sensitive financial data.
Business-Grade Computers
Devices should support full disk encryption, secure boot and modern operating systems that receive regular security updates. Consumer laptops often skip these features to cut costs.
Secure Router and Firewall
Your internet connection is the gateway to your systems. A properly configured business firewall helps prevent unauthorised access and reduces the risk of cyber attacks.
Secure Backup Solutions
Whether you use encrypted external drives or a secure cloud backup service, your financial data must be backed up regularly. Hardware failure, theft or ransomware can otherwise bring your business to a halt.
The Software You Need
Choosing the right software is central to MTD compliance. But simply installing an accounting package isn't enough. It needs to be configured correctly with secure access controls.
MTD-Compatible Accounting Software
Xero, QuickBooks, Sage and FreeAgent are all HMRC-approved. Choose one that fits your business size and sector.
Endpoint Security Software
Antivirus, anti-malware and ideally advanced threat detection on all devices that access financial data.
Secure Cloud Storage
If staff access financial data remotely, the platform must use encryption in transit and at rest. Multi-factor authentication should be enabled.
Regular Software Updates
Outdated systems are one of the most common causes of data breaches. Keep everything patched and up to date.
Policies, Processes and People
Hardware and software are only part of the picture. GDPR requires accountability, which means you need documented processes and trained staff.
Staff Training
Employees should understand how to recognise phishing, create strong passwords and handle personal data responsibly.
Data Retention Policies
Clear rules on how long you keep financial records and when they should be securely deleted.
Access Controls
Not everyone needs access to everything. Limit who can view and edit sensitive financial data.
Not Sure If Your Setup Is Compliant?
We can review your current hardware, software and processes to identify any gaps in your MTD and GDPR compliance. No jargon, just practical advice.
Get a Free IT ReviewThe Bottom Line
Making Tax Digital isn't just about installing accounting software. It's about having the right systems, security and processes in place to keep your financial data safe and your business compliant.
The good news is that getting this right doesn't have to be complicated. With the right hardware, properly configured software, secure backups and a bit of staff awareness training, you can meet both MTD and GDPR requirements without turning your business upside down.
If you're unsure where you stand, we're happy to take a look and give you an honest assessment. No sales pitch, just practical advice from a team that deals with this every day.