“Making Tax Digital” may not sound like the most riveting topic, but it marks one of the most significant shifts in the UK tax landscape in recent years.
In this article, we outline what Making Tax Digital (MTD) involves, who it applies to, and how to ensure you’re prepared well in advance.
What is Making Tax Digital?
Making Tax Digital is HMRC’s long-term plan to modernise the UK’s tax system by requiring certain taxpayers to keep digital records and submit information to HMRC using compatible software.
The aim is to reduce the “tax gap”—the difference between the tax that should be paid and what is actually collected—by helping individuals and businesses improve the accuracy and timeliness of their reporting.
It’s already been rolled out for VAT-registered businesses, and the feedback has largely been positive, especially for those using cloud-based accounting tools.
If you’ve historically relied on paper receipts and annual catch-ups, MTD may feel like a big change—but in practice, it could make life simpler and save you time (and stress) in the long run.
Who Will Be Affected?
The next stage of Making Tax Digital focuses on Income Tax for those with self-employment or property income. Here’s the planned timeline:
- From April 2026: Individuals with gross income over £50,000 from self-employment or property (combined) will need to comply.
- From April 2027: The threshold reduces to £30,000.
- From April 2028: A further reduction is anticipated to £20,000, though this is yet to be confirmed.
It’s important to note:
- These thresholds refer to total gross income—not profit.
- If you receive income from both self-employment and property, you’ll need to add them together to assess whether you meet the threshold.
- Where property is jointly owned, each co-owner is assessed individually for MTD purposes.
Even if MTD doesn’t apply to you just yet, it’s wise to start getting familiar with digital tools now so the transition is as smooth as possible.
What Will You Need to Do?
To comply with Making Tax Digital for Income Tax, you’ll be expected to:
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Maintain digital records
You’ll need to keep your records up to date using compatible software.
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Submit quarterly updates
You’ll send a summary of your income and expenses to HMRC every three months.
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Submit an End of Period Statement (EOPS)
After the tax year ends, you’ll review your quarterly submissions, make any adjustments, and confirm their accuracy.
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Submit a Final Declaration
This replaces your traditional Self Assessment return and serves as the final confirmation of your income for the year.
Submission Deadlines
Once MTD applies to you, the tax year will run from 6th April to 5th April, with quarterly submissions due as follows:
- Q1 (6th April – 5th July): Due by 7th August
- Q2 (6th July – 5th October): Due by 7th November
- Q3 (6th October – 5th January): Due by 7th February
- Q4 (6th January – 5th April): Due by 7th May
These quarterly updates are for reporting purposes only—no tax payments are due at these points.
Tools to Support You
In addition to accounting software, tools like Dext (formerly Receipt Bank) can be helpful.
If you operate multiple businesses or receive income from different sources (e.g. a rental property and a side business), you’ll need to keep digital records and submit updates for each separately.
In Summary
While MTD might initially feel like yet another obligation, it’s actually designed to help you take control of your finances and reduce errors.
If you’d like support getting ready for Making Tax Digital, or advice on choosing the right software, don’t hesitate to get in touch with the team at IN Accountancy. We’re here to help every step of the way.
For even more information check out the information on the official HMRC website!
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