If you work for yourself, you've probably heard the phrase Making Tax Digital by now, often said in a slightly worried tone. This article explains what it actually means, in plain English, and helps you work out whether it applies to you and when.
The short version: it changes how you tell HMRC about your income, not how much tax you pay.
What is it, in one paragraph?
Today, most sole traders send HMRC one tax return a year. Under Making Tax Digital for Income Tax, you keep your business records in an app or software (not a paper notebook or a shoebox of receipts), and that software sends HMRC a short summary every three months. You still do a final return at the end of the year. HMRC's goal is fewer mistakes and fewer surprises. For you, it mostly means keeping your records up to date as you go, rather than doing them all in one go in January.
Does it apply to me?
It applies to sole traders and landlords whose qualifying income is over a certain amount. It is being phased in over three years:
| If your qualifying income on this tax return… | …was over | You must start from |
|---|---|---|
| 2024–25 | £50,000 | 6 April 2026 (already started) |
| 2025–26 | £30,000 | 6 April 2027 |
| 2026–27 | £20,000 | 6 April 2028 |
This is the part people most often get wrong: "qualifying income" is your income before expenses (your turnover), not your profit. It adds together your self-employed income and any rental income. A salary from a job (PAYE) does not count.
Example. Dan is a self-employed electrician. On his 2025–26 tax return he invoiced £38,000 of work and spent £16,000 on materials, van and tools, so his profit was £22,000. His qualifying income is £38,000, the figure before expenses, which is over £30,000. So Dan must use Making Tax Digital from 6 April 2027, even though his profit is well under that.
HMRC checks your figures each year from your tax return, and normally writes to you before you need to start. Don't wait for the letter, though: the numbers are already on your last return.
What actually changes
1. Your records have to be digital. Every sale and every business expense goes into software as it happens, or at least regularly. A photo of each receipt, stored with the expense, is exactly what you want.
2. You send a summary every three months. Your software sends HMRC totals: how much came in, and how much you spent in each expense category. HMRC does not receive every invoice or receipt. Each update covers the tax year so far, so if you spot a mistake later you simply fix your records and the next update carries the corrected totals. The deadlines are:
| Update covers | Send it by |
|---|---|
| 6 April to 5 July | 7 August |
| 6 April to 5 October | 7 November |
| 6 April to 5 January | 7 February |
| 6 April to 5 April (the full year) | 7 May |
If your business year runs on calendar months, you can choose to use quarters that end on 30 June, 30 September, 31 December and 31 March instead. The deadlines are the same.
3. You still do an end-of-year tax return, through your software, by 31 January. That's where you add anything the quarterly updates don't cover and confirm the final figures.
What does not change
How much tax you pay. What you're allowed to claim as an expense. The dates you pay your tax (still 31 January and 31 July for most people). The quarterly updates are reports, not bills: you don't pay tax every quarter.
What if I'm late?
Late quarterly updates earn penalty points, not immediate fines. One point per missed deadline. A £200 penalty only arrives once you reach four points. For the first year, 2026–27, HMRC is not giving points for late quarterly updates at all. That's a soft landing, but not a reason to ignore it: from April 2027 the points count.
Can I get out of it?
Some people can apply for an exemption, for example if age, disability, where you live or your beliefs make using digital tools unreasonable. HMRC calls this being "digitally excluded". Being busy, or not liking computers, isn't enough on its own. If you think you qualify, apply to HMRC; don't just assume.
What to do now
Check your number. Find your last tax return and add up your self-employed income and rental income before expenses. Compare it with the table above.
Start keeping digital records now, even if your start date is 2027 or 2028. Getting into the habit early is much easier than switching in a hurry, and your year-end return gets easier straight away.
Use a separate bank account for the business. It isn't required for sole traders, but it makes digital records far simpler.
Choose software HMRC has recognised for sending the updates. HMRC publishes the list on gov.uk.
Where Invoice4You fits. Invoice4You already keeps your invoices, income and expenses as digital records, sorted into the same expense categories HMRC uses. It can't send quarterly updates to HMRC yet: we're going through HMRC's approval process, and we'll update this page as soon as it can.
Sources: HMRC, Check if you're eligible for Making Tax Digital for Income Tax; HMRC, Work out your qualifying income; HMRC, Send quarterly updates; HMRC press release, 436,000 sole traders and landlords make their tax digital (12 August 2026). This is general information, not tax advice.