If you file a Self Assessment return each year, you may have heard of Making Tax Digital (MTD) through HMRC, news articles, webinars, or your accountant. But many people still aren’t clear on what it means or what they need to do, which can lead to problems later.
For many sole traders and landlords, Making Tax Digital is still a confusing concept rather than something they fully understand. HMRC has introduced the changes in phases, with deadlines and requirements updated over time, making it difficult to know exactly when the rules apply. Without a direct reminder from HMRC or an accountant, many people may assume it can wait. However, delaying preparation can make the transition more stressful when the requirement becomes due.
This guide explains what Making Tax Digital Services involve, who needs to act, and when. It covers the key changes, how MTD differs from Self Assessment, the software and record-keeping requirements, and the steps you can take now to prepare before it applies to you.
What Making Tax Digital Actually Is
Making Tax Digital, or MTD, is HMRC’s long-running push to move tax administration away from annual paper or manual online submissions and towards continuous digital record-keeping. Instead of gathering everything once a year and submitting a single Self Assessment return, MTD requires eligible taxpayers to keep digital records throughout the year and submit updates quarterly through approved software.
The idea behind it is to reduce errors, catch discrepancies earlier, and give both taxpayers and HMRC a clearer, more current picture of tax owed rather than everyone reconstructing a year’s worth of income and expenses in one stressful sitting each January.
Who This Affects If You Currently File Self Assessment
MTD for Income Tax applies specifically to sole traders and landlords above certain income thresholds, with HMRC phasing in the requirement based on qualifying income levels. If your Self Assessment Tax Return Filing currently covers self-employment income, property income, or both, and your qualifying income sits above the relevant threshold, you’ll be required to move onto MTD once your phase applies to you.
It’s worth being clear that this doesn’t apply to everyone who currently completes a Self Assessment return. Those with income below the relevant thresholds can continue with traditional Self Assessment Tax Return Filing for now, though HMRC has signalled that thresholds may be lowered over time, gradually bringing more taxpayers into scope.
What Changes Once You’re Required to Use MTD
The most significant shift is frequency. Instead of one annual submission, you’ll need to:
- Keep digital records of income and expenses using compatible software, rather than spreadsheets or paper records alone
- Submit quarterly updates to HMRC summarising income and expenses for that period
- Complete a final declaration at the end of the tax year, which replaces the traditional Self Assessment return and confirms your total tax position
This is a genuine change in rhythm, not just a different form. Businesses used to a once-a-year process need to build quarterly reporting into their routine, which usually means tighter, more consistent bookkeeping throughout the year rather than a year-end catch-up.
Why Software Compatibility Matters
Because MTD requires digital record-keeping through approved software, spreadsheets alone generally won’t satisfy the requirement unless they’re linked to compatible bridging software. This is where many taxpayers currently relying on manual Self Assessment Tax Return Filing methods will need to make the biggest adjustment either adopting new software or working with a provider who manages this on their behalf.
Good Making Tax Digital Services typically include exactly this kind of software setup and ongoing support, so you’re not left trying to configure unfamiliar systems alone in the middle of a busy trading year.
What to Do If You Know You’ll Be Affected
If you can see that your income already sits above the relevant threshold, or is likely to soon, it’s worth preparing well before your mandatory start date rather than waiting until the deadline is close:
- Check Your Qualifying Income and MTD Start Date: Confirm your qualifying income and identify which Making Tax Digital phase applies to you based on the current thresholds.
- Choose the Right MTD-Compatible Software: Select compatible accounting software early and take time to become familiar with quarterly reporting before it becomes mandatory.
- Improve Your Record-Keeping Process: Organise your financial records now to make the transition to MTD smoother and avoid last-minute changes.
- Get Support with Making Tax Digital Services: Speak to a provider offering Making Tax Digital Services if you need help managing software, submissions, and ongoing compliance.
Why Getting Support Early Makes Sense
Moving from annual to quarterly reporting is a bigger operational shift than it first appears, particularly for sole traders juggling client work, invoicing, and day-to-day operations without dedicated admin support. Providers offering dedicated Making Tax Digital Services typically handle software setup, ongoing quarterly submissions, and the final declaration together, which removes much of the administrative burden from the taxpayer directly.
For anyone currently comfortable with traditional Self Assessment Tax Return Filing, it’s worth remembering that MTD isn’t replacing the underlying tax rules it’s changing how and how often you report. Getting familiar with the process before it becomes mandatory, rather than scrambling once your phase arrives, makes for a far smoother transition.
Conclusion
Making Tax Digital represents a genuine shift in how Self Assessment works for those above the relevant income thresholds, replacing a single annual submission with ongoing digital record-keeping and quarterly updates. If you’re unsure whether or when it applies to you, checking your qualifying income now rather than waiting for a letter from HMRC puts you in a much stronger position. Whether you handle the transition yourself with compatible software or bring in dedicated Making Tax Digital Services, the businesses that adapt earliest tend to find the change far less disruptive than those who leave it until the deadline is already close.
MyIVA supports sole traders and landlords through every stage of this transition, from confirming whether and when MTD applies to you, to setting up compatible software and managing your quarterly submissions and final declaration. If you’d rather have the process handled for you than navigate it alone, get in touch with MyIVA and we’ll make sure you’re fully prepared well before your mandatory start date.
