Making Tax Digital is already in play for VAT-registered businesses, but change is on its way for sole traders, private residential landlords and other businesses that report via Self Assessment.
If you’re in the category of people who will need to learn more about Making Tax Digital for Income Tax Self Assessment, we’re here to help. We’ve put together some frequently asked questions about the updates for Making Tax Digital for Income Tax to help guide you.
What is Making Tax Digital?
Making Tax Digital is a government initiative to change record-keeping and reporting requirements for the UK tax system. Starting in 2019, MTD began with VAT-registered businesses with a taxable turnover above the VAT-registration threshold. Next up were all VAT-registered businesses in 2022, and soon MTD will be implemented for Income Tax Self Assessment with the full UK tax system to follow in the near future.
The government introduced the Making Tax Digital initiative to enable businesses to manage their taxes more efficiently and with the hope that MTD will make basic tax errors less likely.
When will Making Tax Digital come into play for Income Tax Self Assessment?
In the initial phase, if you’re registered for Income Tax Self Assessment and have a gross self-employed or rental income of more than £50,000 per year, or you currently report taxable income via Self Assessment, you will be affected by the upcoming changes due to come into play from April 2026.
Other phases are to follow, but dates are yet to be announced.
Who is exempt from Making Tax Digital for Income Tax Self Assessment?
You can apply for exemption if it’s not practical for you to use software to keep digital records or submit data to HMRC digitally. This could be, for example, your age, disability, location, religious grounds or other justifiable reasons.
You must explain your reasoning to HMRC, and if accepted, an alternative solution will be found.
Will an annual Self Assessment tax return still need to be completed?
As of 6th April 2024, you’ll need to report taxable self-employed or property rental income via Making Tax Digital for Income Tax Self Assessment. Although HMRC would recommend that you report other taxable income through MTD when making your final declaration, you’re not required at this stage by law to do so. You can still report other income via Self Assessment.
What software can be used for Making Tax Digital for Income Tax Self Assessment?
1, MTD for Income Tax Self Assessment compliant software that will enable you to report data as per MTD rules
2, Bridging software which works with non-MTD compatible software (such as Spreadsheets) so you can submit the necessary information to HMRC digitally at the end of each quarter and at the end of the year
What are the HMRC update deadlines?
All businesses within Making Tax Digital for Income Tax Self Assessment will need to provide quarterly updates of income and expenses:
| Period Covered | Filing Deadline | |
| Quarterly Update 1 | 6th April to 5th July | 5th August |
| Quarterly Update 2 | 6th July to 5th October | 5th November |
| Quarterly Update 3 | 6th October to 5th January | 5th February |
| Quarterly Update 4 | 6th January to 5th April | 5th May |
Alternatively, you can make a ‘calendar quarter election’ which allows for quarterly updates to the end of the previous month:
| Period Covered | Filing Deadline | |
| Quarterly Update 1 | 1st April to 30th June | 5th August |
| Quarterly Update 2 | 1st July to 30th September | 5th November |
| Quarterly Update 3 | 1st October to 31st December | 5th February |
| Quarterly Update 4 | 1st January to 31st March | 5th May |
Benefits of Making Tax Digital for Income Tax Self Assessment
One of the biggest advantages to Making Tax Digital is that you will be able to better estimate how much tax you owe, which can help with budgeting and paying tax bills towards the end of the year.
Businesses will also avoid the lengthy task of gathering tax figures at the end of the year to complete an annual tax return as they will all be accessible digitally.
Where can you get help for Making Tax Digital for Income Tax Self Assessment?
MTD for Income Tax is a huge change, one that comes with many questions and caveats. Here at TBL it’s our job to understand the new policies and processes in order to help you to understand these changes better.
Our team of highly qualified experts are available to help you digest Making Tax Digital and answer the questions you have.
Speak with our team on 01702 466 886 or fill out a contact form and we’ll get back to you.
The contents of this article are for general awareness only. Information within this article was correct at the time of publishing.
Please seek professional advice should you need more information on Making Tax Digital.
