Making Tax Digital is a new way for you to manage tax records digitally and submit updates to HMRC
Millions of people will have to follow new rules for submitting their tax returns to HMRC from today.
Making Tax Digital is a new way for you to manage tax records digitally and submit updates to HMRC.
It is being rolled out today to approximately 780,000 to 864,000 sole traders and landlords with an annual income over £50,000.
If this is you, then you will need to use software that is compatible with Making Tax Digital to deal with your tax affairs.
The software you use will need to be able to store information about your income, expenses, VAT (if VAT-registered) and tax adjustments.
If you have multiple sources of income, it will need to be able to track both of these. If you already use accounting software, you should check if it is compliant with Making Tax Digital.
There is a list of third-party products that are approved on GOV.UK.
Instead of submitting one tax return, you will need to use this software to send four quarterly updates of income and expenses every tax year, followed by one final declaration.
The new deadlines are:
- August 7 for quarter 1 (April 6 to July 5)
- November 7 for quarter 2 (July 6 to October 5)
- February 7 for quarter 3 (October 6 to January 5)
- May 7 for quarter 4 (January 6 to April 5)
- January 7 for your final declaration
The earnings mark for Making Tax Digital will be lowered to £30,000 from April 2027, from to £20,000 from April 2028.
There is a points system and fines for missing deadlines. For each quarterly update or tax return deadline you miss, you get a penalty point.
You get a £200 fine when you reach four points for quarterly submissions. These penalty points stay on your tax record for two years before they expire.
There are no penalties for missing a quarterly update deadline for the 2026/27 tax year, while people get used to the new system – however, you will still be required to file your updates and final statement.
It is important to note that points for late submission accrue separately for VAT and income tax.
The £100 fine for missing the self-assessment deadline is being replaced by the points system, where two points will trigger a £200 fine for annual filers.
This means you would be fined for missing two annual submission deadlines, and not missing one deadline as you would currently.
VAT-registered businesses have been required to use Making Tax Digital for VAT purposes since 2022.
Charlene Young, AJ Bell pensions and savings expert said: “The government hopes the move will close the tax gap, with quarterly reporting improving accuracy, and aiming to raise £780million by 2028-29.
“However, for landlords and small business owners this will undoubtedly create additional admin, and a new regime of penalty points to get to grips with. Partnerships and incorporated firms will be exempt from the initial income tax roll out, although many will already be under the MTD regime for VAT.
“What’s more, taxpayers falling into MTD (or their agents) must use and pay for compatible software to file and will no longer be able to rely on HMRC’s own free system.
“With millions of unrepresented taxpayers using HMRC’s system to file self-assessment returns, it shows a huge change required from 6 April 2026 for those subject to the new rules.
