Accounting services
Making Tax Digital for motor trade businesses
Motor Trade Accounting helps garages, dealers and other motor trade businesses across the UK get Making Tax Digital set up and running smoothly. Tell us how you keep your records today and a specialist can show you what needs to change.
What Making Tax Digital means for the motor trade
Making Tax Digital, usually shortened to MTD, is HMRC's move away from paper records and manually typed returns. For VAT it already applies to every VAT-registered business, whatever its turnover: records have to be kept digitally, and returns have to be sent from software that connects to HMRC. For Income Tax it started on 6 April 2026 for sole traders and landlords whose qualifying income is above the first threshold, and HMRC has set lower thresholds that bring more people in from April 2027 and again from April 2028.
In a motor business the hard part is rarely the software itself. It is the volume and variety of transactions: parts invoices from several factors, card takings, cash jobs, vehicles bought from private sellers, finance company settlements, manufacturer claims and trade-in allowances. Each of those has to land in the digital records in the right place, with the right VAT treatment, before a quarterly update or VAT return can be trusted.
A specialist motor trade accountant looks at how your information flows from the workshop or showroom into your books. That might mean connecting your garage management system or dealer management system to your accounting software, replacing a spreadsheet that has outgrown itself, or setting up digital links so figures are not retyped between programs. The aim is a setup that meets HMRC's rules and saves you time every quarter rather than adding to it.
Help with MTD for your motor business
Support is built around your records, your software and the returns you have to make.
- Checking whether you are in scopeWorking out which MTD rules apply to you now, which will apply later, and what that means for a sole trader, partnership or limited company.
- Choosing compatible softwareComparing HMRC-recognised software against the way your garage or dealership actually works, including links to workshop and stock systems.
- Setting up digital linksMaking sure figures move between systems electronically, so nothing is copied and pasted between a spreadsheet and the return.
- Margin scheme and stock recordsMaking sure used vehicle purchases and sales sit correctly in digital records alongside your stock book.
- Quarterly updatesReviewing the figures before each quarterly update for Income Tax, so the year-end declaration holds no surprises.
- VAT returns through softwareChecking each VAT return for the usual motor trade traps before it is sent from your software.
- Training for whoever keeps the booksShowing your bookkeeper or office manager how to code transactions so the digital records stay clean.
What to plan before switching to MTD
A little preparation makes the move to digital records far easier, especially if your year is already under way.
Know your qualifying income
For MTD for Income Tax, HMRC looks at your gross income from self-employment and property, not your profit. Check the current threshold on GOV.UK and compare it with your recent returns.
List every source of transactions
Write down where money comes in and goes out: card terminals, bank accounts, cash, finance houses, parts accounts and online marketplaces. Each one needs a route into the records.
Pick a sensible start date
Starting software at the beginning of a VAT quarter or tax year keeps the opening figures clean and avoids splitting a period across two systems.
Decide who does what
Agree who records daily transactions, who reconciles the bank and who reviews the figures before an update is sent to HMRC.
Good to know about Making Tax Digital
Spreadsheets can still play a part
Bridging software can send figures from a spreadsheet to HMRC, but the links within the spreadsheet must be digital and the records still have to be complete.
Companies are treated differently
Limited companies follow MTD for VAT if they are VAT registered, but they are not yet within MTD for Income Tax. Corporation tax returns carry on as before for now.
Quarterly updates are not tax bills
Under MTD for Income Tax, quarterly updates report income and expenses. The tax is still worked out and paid through the final declaration and the usual payment dates.
Penalties work on points
Late VAT returns and, in time, late MTD submissions build up penalty points, with a financial penalty once a threshold is reached. Check HMRC's guidance for the current rules.
How it works
- 1
Tell us about your business
Share your trade, your structure and how you keep records today using the enquiry form.
- 2
Talk it through
A specialist motor trade accountant gets in touch to understand your systems and which MTD rules apply.
- 3
Set up and test
Software, links and coding are set up, and a trial period is checked before anything is sent to HMRC.
- 4
Keep it running
Each quarter the figures are reviewed and any problems with coding or missing records are picked up early.
Questions about Making Tax Digital
Does MTD for Income Tax apply to me if I run a limited company?
Not at the moment. MTD for Income Tax covers sole traders and landlords; limited companies only need to follow MTD for VAT if they are VAT registered.
I am a sole trader below the threshold. Do I need to do anything?
Not yet, but HMRC is lowering the threshold in stages from April 2027 and April 2028, so it is worth checking your income each year and planning ahead.
Can I keep using my garage management system?
Often yes. Many workshop and dealer systems can send data to accounting software, and the job is to make sure that link is digital and the coding is right.
What counts as a digital link?
Any electronic transfer of data between programs, such as an import, an API connection or linked cells. Retyping or copying and pasting figures between programs does not count.
Does MTD change how the VAT Margin Scheme works?
No. The margin scheme rules are the same, but the figures it produces must sit in your digital records and reach HMRC through compatible software.
Who will I be speaking to?
Your enquiry goes to a qualified accountant who works with motor trade businesses and understands the systems garages and dealers use.
Get Making Tax Digital sorted
Tell us how your records work today and a specialist motor trade accountant will talk you through what needs to change.