Making Tax Digital, without the jargon
The biggest shake-up to self-employed tax in decades is already underway. Here's what it means if you're on the tools - who it hits, when, and what you actually have to do about it.
THE SHORT VERSION
Making Tax Digital (MTD) means keeping your business records digitally and sending HMRC an update every three months instead of doing one tax return a year. If you're a sole trader turning over more than £50,000, it already applies to you. More people get pulled in every year until it reaches £20,000 in 2028.
WHAT IS MAKING TAX DIGITAL?
Making Tax Digital is HMRC's plan to move the tax system online. Paper records and once-a-year returns are on the way out. Digital records and regular updates are on the way in.
It's already happened for VAT. Now it's income tax's turn - and that's the bit that affects sole traders, subcontractors and landlords.
What is Making Tax Digital for Income Tax?
Officially it's Making Tax Digital for Income Tax Self Assessment - MTD for ITSA, or just MTD for Income Tax. It applies to self-employed people and landlords rather than limited companies.
Under it you have to do three things:
- check_circleKeep digital records of your income and expenses as you go
- check_circleUse software that can talk to HMRC
- check_circleSend HMRC a summary every three months
That's it. It sounds like more work, and if you're doing it by hand it is. Done properly by an app, it's actually less - because nothing piles up.
DOES IT APPLY TO ME?
It comes in by income, in three waves. Find your number and you'll know your date.
Based on your 2024/25 tax return
6 April 2026
Based on your 2025/26 tax return
6 April 2027
Based on your 2026/27 tax return
6 April 2028
The bit that catches people out
The threshold is your turnover, not your profit. HMRC calls it qualifying income and it means everything you invoice from self-employment and property before you take off materials, fuel, tools or anything else.
So if you turned over £55,000 last year and took home £28,000 after costs, you're in the first wave - not a later one. A lot of tradespeople will be further forward than they think.
WHAT'S ACTUALLY CHANGING
THE FOUR DEADLINES
Same dates every year. Each update is due one month and two days after the quarter closes.
You still do a tax return
This is the other thing people get wrong. Quarterly updates don't replace Self Assessment - they run alongside it. You still finalise the year and pay what you owe by 31 January, same as always. The updates just mean HMRC sees the picture as it builds, and so do you.
WHAT IF YOU DON'T DO IT?
HMRC knows this is a big change, so there's a soft landing. Late quarterly updates won't earn you penalty points during the 2026/27 tax year. After that, the grace period ends.
From then on, missing an update earns a point. Collect enough points and you get a fine. It works like a driving licence - one slip isn't a problem, a habit is.
Late payment of the tax itself is a separate matter and those penalties already apply. The soft landing is only about the new quarterly reporting, not about paying what you owe on time.
WHAT RECORDS DO YOU HAVE TO KEEP?
Nothing you aren't already meant to be keeping. The difference is it has to be digital, and it has to be kept as you go rather than reconstructed from a carrier bag in January.
For a sole trader that means:
- check_circleEvery payment that comes in - the date, the amount and what it was for
- check_circleEvery business expense going out, in the right category
- check_circleMaterials, tools and consumables
- check_circleVehicle and mileage costs
- check_circleAnything you're claiming for working from home
You don't have to send HMRC every single transaction. The quarterly update is a summary - totals by category. But the detail behind it has to exist digitally, so it needs capturing somewhere as it happens.
On the CIS scheme?
If you're a subcontractor, your contractor already takes 20% (or 30%) off before you get paid. That doesn't exempt you from MTD. Your qualifying income is what you invoiced before the deduction, so a lot of subbies hit the threshold sooner than they expect - and you still report income and expenses quarterly like everyone else. Any CIS already deducted gets settled up at the end of the year, same as now. How the deductions themselves work is covered in our CIS guide for subcontractors.
HOW TO GET READY
Work out which wave you're in
Look at your turnover, not your profit, on your last filed return. That tells you your start date.
Stop using paper
The habit is the hard part, not the software. Start capturing income and expenses digitally now, before it's compulsory.
Separate your business banking
One account for the business makes categorising painless. Mixing personal and business spending is what turns this into a chore.
Pick software before your start date
Not the week of your first deadline. Give yourself a quarter to get used to it while nothing's riding on it.
HOW BOSH DOES IT FOR YOU
You're out on jobs, not behind a desk. Four updates a year shouldn't mean four days of admin.
1. Connect your bank
Link your account with Open Banking and every job payment and expense lands in Bosh automatically. Read-only - we can't move your money.
2. We sort the records
Screwfix, Toolstation, fuel, materials. Every transaction gets categorised into HMRC-compliant categories as it happens. That's your digital record keeping done.
3. Submit in a couple of taps
When a quarter closes we tell you. Check the summary, hit submit, done. No spreadsheets, no forms, no January panic.
From £3.99 a month. Cancel any time.
MTD QUESTIONS
The things people actually ask us about Making Tax Digital.
What is Making Tax Digital in simple terms?
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It's HMRC moving self-employed tax online. Instead of one tax return a year, you keep your records digitally and send HMRC a short update every three months. The idea is that your tax is based on up-to-date figures rather than a scramble every January.
Does Making Tax Digital apply to me?
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If you're a sole trader or landlord and your qualifying income is over the threshold for your phase, yes. It started at £50,000 from April 2026, drops to £30,000 from April 2027, and £20,000 from April 2028. If you earn under £20,000 from self-employment and property, it doesn't apply to you yet.
What counts as qualifying income?
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Your total gross income from self-employment and property, before you take off any expenses. This catches people out. If you turn over £55,000 and your profit after materials, fuel and tools is £28,000, it's the £55,000 that counts - so you're in the first phase, not a later one.
When do I actually have to start?
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It depends on your income and it's based on a tax return you've already filed. The £50,000 phase started on 6 April 2026 and used your 2024/25 return. The £30,000 phase starts 6 April 2027 based on your 2025/26 return. The £20,000 phase starts 6 April 2028 based on your 2026/27 return.
Do I still have to do a Self Assessment?
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Yes. Quarterly updates don't replace your tax return - they sit alongside it. You still finalise everything and pay what you owe by 31 January as normal. The quarterly updates are just running totals through the year.
What are the quarterly deadlines?
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There are four a year, each due one month and two days after the quarter ends: 7 August, 7 November, 7 February and 7 May. They're the same dates every year, whatever trade you're in.
What happens if I miss a quarterly update?
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HMRC is running a soft landing and won't apply penalty points for late quarterly updates during the 2026/27 tax year. After that, late updates build up penalty points and you can be fined once you hit the threshold. Worth getting into the habit early.
Can I still use a spreadsheet?
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Not on its own. MTD requires your records to be kept digitally and submitted through compatible software. A spreadsheet plus bridging software can work, but for most sole traders it's more faff than just using an app that does it automatically.
Do I need an accountant for Making Tax Digital?
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No. That's exactly what Bosh is for. Keeping digital records and sending quarterly updates is repetitive work that software should be doing for you - connect your bank, let it categorise as you go, check the summary and submit.
Can I be exempt from Making Tax Digital?
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Some people can. The main ground is being digitally excluded - for example if you can't use digital tools because of age, disability, location or religious grounds. You have to apply to HMRC for an exemption, it isn't automatic.
Don't let quarterly updates catch you out
Bosh keeps your records straight in the background and tells you when a deadline's coming. Tax sorted. Job done.
Get started freeThis guide is general information about Making Tax Digital for Income Tax, not tax advice for your particular situation. Thresholds and dates are as published by HMRC. For the official detail see GOV.UK.