Most self-employed people have an annual rhythm. Earn money through the year, keep track of what you can, pull it all together in January, file your Self Assessment, and breathe out. It’s not always pleasant, but it’s familiar.
Making Tax Digital is changing that rhythm – and if you’re a sole trader or landlord and earned over £50,000 in the 2024-25 tax year, those changes are starting now.
This post explains what Making Tax Digital actually means in practice, who it applies to and when, and what you should be doing to get ready. No jargon, no panic – just a plain-English guide to what’s coming.
What Is Making Tax Digital?
Making Tax Digital (MTD) is HMRC’s programme to move the UK tax system fully digital. The idea is that instead of summarising a whole year’s income and expenses in one go, you maintain digital records throughout the year and send quarterly updates to HMRC via compatible software.
The programme has been running for VAT since 2019. MTD for Income Tax Self Assessment – which affects self-employed people and landlords – is now being rolled out.
Think of it less as a new tax and more as a new way of reporting the tax you already owe. The amount you pay doesn’t automatically change. What changes is how often you report, and the software you use to do it.
Who Does It Apply To – and When?
When you need to start using Making Tax Digital for Income Tax depends on your qualifying income within a tax year. If your qualifying income is over:
- £50,000 for the 2024 to 2025 tax year, you will need to use it from 6 April 2026
- £30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027
- £20,000 for the 2026 to 2027 tax year, you will need to use it from 6 April 2028
So, you’ll fall into it from 6 April 2026 if your qualifying income to 6 April 2025 is over £50k.
It’s worth noting that ‘qualifying income’ means your total income before expenses, not your profit. For example, if your turnover is over £55,000 but you have significant costs, you’re still in scope even if your taxable profit is lower than £50,000.
What Changes in Practice?
The most significant change is moving from one annual submission to four cumulative quarterly updates, followed by a tax return submitted through compatible software after the end of the tax year.
Under MTD, you’ll need to:
- Keep digital records of your income and expenses throughout the year in compatible software, not a spreadsheet or a shoebox
- Submit quarterly updates to HMRC. Each update is cumulative, covering from the start of the tax year to the end of that update period. The updates are summaries of your income and expenses, not tax returns.
- Prepare and submit your tax return through compatible software after the tax year closes, checking the full-year information and adding any adjustments, reliefs, allowances, other income or gains.
The quarterly updates themselves are relatively straightforward if your records are up to date – they’re not full returns. The harder shift is the discipline of keeping accurate digital records all year, rather than reconstructing them in January.
What Software Do You Need?
You’ll need to use HMRC-approved software to submit your quarterly updates. You can’t do it through HMRC’s own portal in the same way you file a Self Assessment today.
There are several widely used options – including Xero, QuickBooks, FreeAgent, and Sage – and HMRC maintains a list of approved software on their website. The right choice depends on your business: how complex your income is, whether you have employees, what you’re already using.
If you’re currently using a spreadsheet or paper records, this is the point where you’ll need to make the switch. Some bridging software exists that can pull data from a spreadsheet and submit to HMRC, but it’s generally more reliable – and less stressful – to move to a proper cloud accounting package.
What Are the Deadlines for Quarterly Updates?
Under MTD for Income Tax, quarterly updates follow a set calendar:
| Quarter | Covers | Deadline |
| Q1 | 6 April – 5 July | 7 August |
| Q2 | 6 April – 5 October | 7 November |
| Q3 | 6 April – 5 January | 7 February |
| Q4 | 6 April – 5 April | 7 May |
After the final quarterly update, you use compatible software to check the full-year information, make any necessary adjustments and submit your tax return by 31 January following the end of the tax year.
HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. The updates must still be sent before you can submit the tax return, and late-return penalties can still apply. For later tax years, missed quarterly deadlines can generate penalty points under the new regime.
What Happens If You’re Not Ready?
There are no penalty points for missing a quarterly update deadline in the 2026 to 2027 tax year, but this is not an exemption from Making Tax Digital. Digital records must still be kept, and all quarterly updates must be sent before the tax return can be submitted. The income thresholds also reduce over the following two years.
The businesses most likely to struggle are those whose record-keeping is irregular, whose income mixes different sources, or who’ve always left everything until January. If that sounds familiar, now is a good time to address it – not because the deadline is here today, but because building better habits takes time.
The businesses least likely to be troubled are those who already keep clean digital records, use cloud software, and work closely with their accountant throughout the year. MTD, for them, is largely a formalisation of what they’re already doing.
How Caboodle Can Help
At Caboodle, we’ve been watching the MTD rollout closely and helping clients to get their records and software in order ahead of the changes.
Whether you’re already in scope and need to make sure you’re compliant, or you want to get ahead of the 2027 threshold, we can help you to:
- Choose and set up the right accounting software for your business
- Review your current record-keeping and identify any gaps
- Understand how your quarterly submissions will work in practice
- Check the full-year information and submit your tax return accurately and on time.
If you’d like to talk through how Making Tax Digital affects your situation, we’re always happy to have a straightforward conversation about where you are and what would help.
Our team works with sole traders and small businesses across Salisbury and Wiltshire. The combination of accounting expertise and personal coaching we provide means we can help you not just with the compliance side, but with building the habits that make staying on top of your finances less painful year-round.
Take a look at our sole trader accountancy service and how we work with clients.
Official guidance: HMRC quarterly updates and HMRC penalty guidance.
Last reviewed: 14 July 2026.
Making Tax Digital doesn’t have to be complicated. It just needs to be on your radar – and it is now