Making Tax Digital for Income Tax replaces the single annual Self Assessment return with digital records, quarterly updates to HMRC and a final declaration after the year ends. It applies to sole traders and landlords in phases by income level, starting with the highest earners. Moving your records into compatible software early makes the change close to painless.
Making Tax Digital has been rolling out across the UK tax system for several years. Its next big phase is income tax, and it affects sole traders and landlords.
What it means
If you are in scope, you keep your business and property records digitally and send HMRC a short update every quarter, instead of one Self Assessment return a year. After the year ends, a final declaration confirms the full picture. The aim is more frequent and more accurate reporting.
Who is in scope, and when
It is being introduced by income level, in phases rather than all at once. Sole traders and landlords with the highest qualifying income come in first, with lower thresholds following in later years.
The thresholds and dates have changed more than once since the scheme was announced, so check HMRC’s current guidance, or ask us, rather than relying on an older article.
The quiet upside
Done in software with a bank feed, the quarterly updates are largely automatic. Transactions flow in, are categorised as you go, and the update is a summary of what is already there. Every TVNDEM plan includes Pandle cloud accounting, or we can work in the software you already use where it suits.
How to prepare now
Move your records into digital form before you have to. Make sure the software you use is compatible with Making Tax Digital. And if your income sits close to a threshold, plan around it on purpose rather than finding out after the fact.
The people who find the change hardest are those still keeping paper records. Starting early removes almost all of the pain.
General information only, not advice for your circumstances.