As part of the new process, taxpayers have to submit quarterly updates through HMRC-approved software for their income and expenses
HMRC is rolling out a new way to report income tax – and the first deadline for making a submission is just one day away.
Making Tax Digital is now mandatory for approximately 864,000 sole traders and landlords with qualifying income over £50,000.
As part of the new process, taxpayers have to submit quarterly updates through HMRC-approved software for their income and expenses – with the first one due on August 7.
After each update, you will see an estimate of their tax bill. You still then need to submit an end-of-year tax return as normal on January 31 – and the deadline to pay any tax owed is also still January 31.
Kevin Mountford, personal finance expert and co-founder of Raisin UK, said: “Anyone relying on an accountant should check that the update has been submitted on their behalf.
“Some taxpayers may be putting the task off because they are unsure what information is needed or whether their records are complete, but the simplest first step is to log into their accounting software, check that their income and expenses are up to date and contact their accountant or software provider immediately if anything is unclear.”
There are fines for missing deadlines under Making Tax Digital, with a points system being used. You will get one point for each missed quarterly update, then a £200 fine will be issued when you reach four points.
Any points expire after 24 months of filing on time. But there is a 12-month transitional grace period for the first year of Making Tax Digital, meaning no penalty points are currently being issued for late updates.
Mr Mountford added: “Although HMRC will not issue penalties for missing a quarterly update during the first year, delaying it could create a bigger administrative and financial headache later.
“Taxpayers must still submit the outstanding updates before they can complete their annual tax return, so allowing them to build up risks turning a manageable quarterly task into a last-minute scramble.”
Under the current self-assessment rules, you receive an immediate £100 fine if you submit your self-assessment tax return late. The deadline for self-assessment is January 31.
Making Tax Digital will be rolled out to those earning more than £30,000 from April 2027, and to those earning more than £20,000 from April 2028.
VAT-registered businesses have been required to use Making Tax Digital for VAT purposes since 2022.
