Making Tax Digital: What Does it Mean, and Does it Apply to You?

There’s a new way to do tax returns as a sole trader. Come April 2026, you’ll need to be using recognised software to keep your records in order to improve accuracy and efficiency, and reduce paperwork and form-filling.

Does This Change Apply To Me?

If your annual income is likely to be £50,000 or more for January’s self-assessment AND that income is made entirely through self-employment or through property, then this change applies to you. From 6 April 2026, you’ll need to be sending digital quarterly updates to HMRC straight from your software.

The deadline for your tax return will still be 31 January – these quarterly updates are just simple summaries of how your business is doing, in four smaller chunks, pulled from your records. The benefit of this is that you’ll be able to see an estimate of your tax bill to plan ahead after sending each update.

NB: If your annual income is likely to be lower than £50,000, this change may apply to you at a later date as the initiative gets phased in. By 2027 the threshold will be £30,000, and by 2028 it will be £20,000.

What Do I Need to Do?

From 6 April onwards, you’ll need to use recognised software to process your figures that is compatible with “Making Tax Digital”. These include the following:

• Xero
• QuickBooks
• Sage Accounting
• FreeAgent
• Clear Books

 

With this software, you’ll need to keep track of the following:

• Creating digital records for your income
• Keeping track of your expenses
• Sending quarterly updates to HMRC
• Submitting your annual tax return

 

You will also need to actively sign up for the scheme on the government website. If this is something you haven’t done yet, you can find out how to sign up here.

Why Do I Have to Send Quarterly Updates?

Although this sounds like a lot of work, these quarterly updates aim to spread your workload throughout the year, meaning you won’t be scrambling in January! Don’t worry, these quarterly updates are not final, so errors can be corrected as you go along.

The Benefits

This change may be making you feel stressed or overwhelmed, but it aims to do the opposite. Let’s look at the benefits:

• Time efficiency – making the process automatic saves you time in the long run
• Accuracy – regular updates mean fewer mistakes when you file your tax return
• Clarity – quarterly reporting offers a clearer picture of your tax obligations, which means less surprises
• Planning ahead – quarterly reporting also means you’ll be able to see an estimate of your tax bill to plan ahead after sending each update
• Compliance – you’ll know your accounts comply with HMRC’s requirements, so no nasty penalties!

When Should I Send My Quarterly Updates?

The HMRC has strict deadlines for when your quarterly updates should be sent. They are as follows:

Still Lost?

Don’t panic, a lot of these changes won’t make sense until you have the software in place. These programmes are designed to be easy to use, and HMRC is working closely with software providers to make the process as easy as possible.

You can find out more info on the Making Tax Digital website.

If these changes feel overwhelming to you, remember the Electrical Industries Charity is always here to help you. If you think you need to speak with a professional about your emotional or financial wellbeing, please get in touch with our support team by calling our helpline on 0800 652 1618 or emailing support@electricalcharity.org.