How Making Tax Digital Changes Self Assessment
For many sole traders and landlords, Self Assessment has traditionally been an annual process: collect the records, prepare the accounts, complete the tax return and pay the tax.
Making Tax Digital for Income Tax changes this routine. Year-end tax work will still be required, but record keeping and reporting will need to take place throughout the year.
Digital Records
Under Making Tax Digital, qualifying sole traders and landlords must maintain digital accounting records using suitable software or a digital system linked to compatible MTD software.
For someone already using bookkeeping software regularly, this may not feel like a significant change. However, it will be more substantial for anyone who currently gives their accountant paper records or a spreadsheet once a year.
Quarterly Updates
The most noticeable change is the requirement to submit quarterly summaries of income and expenses to HMRC.
The standard quarterly deadlines are generally:
- 7 August
- 7 November
- 7 February
- 7 May
This creates four additional points during the year when bookkeeping records must be sufficiently up to date. Bookkeeping therefore becomes a continuing responsibility rather than an annual project.
Does the Annual Tax Return Disappear?
No. There will still be a year-end process to confirm the correct accounting and tax treatment and finalise the taxpayer’s wider Self Assessment position.
Quarterly updates should not be confused with four complete tax returns. They are summaries submitted as part of the MTD reporting process.
The underlying tax calculation and normal Self Assessment payment timetable also remain broadly the same. MTD mainly changes how records are maintained and how information is reported to HMRC.
Who Is Affected?
Mandatory MTD for Income Tax began in April 2026 for the first group of taxpayers. From April 2027, those with qualifying self-employment and property income above £30,000 are due to enter the regime.
People still using the traditional annual approach should consider:
- Is my bookkeeping digital and regularly updated?
- Am I using compatible software?
- Which income falls within MTD?
- Who will make the quarterly submissions?
- What information will my accountant need?
Prepare Before the First Deadline
The businesses likely to find MTD easiest will be those with a simple and organised bookkeeping process.
Record transactions regularly, separate business and personal expenditure, keep receipts digitally and reconcile the bank account. Making Tax Digital can then become an extension of good bookkeeping, rather than creating four new emergencies every year.
