Making Tax Digital for Income Tax changes how qualifying sole traders and landlords communicate their business and property information to HMRC. One of the most important requirements is the introduction of regular quarterly updates.
Under Making Tax Digital, qualifying taxpayers need to maintain digital records of their self-employment and property income and expenses and use compatible software to submit summaries to HMRC during the tax year.
From 6 April 2026, these requirements apply to relevant sole traders and landlords with qualifying income over £50,000. They will extend to those with qualifying income over £30,000 from April 2027 and over £20,000 from April 2028.
Quarterly updates are designed to summarise information from your digital records. This means your bookkeeping should ideally be maintained throughout the year rather than completed shortly before your annual tax return deadline.
For a sole trader, digital records may include income from customers together with relevant business expenses. For a landlord, records may include rental income and qualifying property-related expenses.
If you operate more than one business or have both self-employment and property income, your reporting requirements can become more complicated. Maintaining clear records for each source of income will make it easier to prepare accurate updates.
One important benefit of regular bookkeeping is that it can provide a more up-to-date view of your business performance. Instead of waiting until the end of the tax year to understand your income and expenses, you can review your financial position throughout the year.
Quarterly updates should not be confused with paying your final Income Tax bill every three months. The updates provide information to HMRC, while your final tax calculation and payment responsibilities continue to follow the relevant Income Tax and Self Assessment rules.
You will also need to review your information after the tax year ends. Adjustments may be required before your final tax position is confirmed, particularly where accounting adjustments, allowances or other sources of income need to be included.
The move towards quarterly reporting means businesses should avoid leaving bookkeeping until January. Missing transactions, incorrect expense categories and unreconciled bank accounts can become more difficult to correct if bookkeeping is not maintained regularly.
Using compatible accounting software can help automate parts of this process. Bank feeds, digital receipt storage and transaction categorisation can make it easier to maintain accurate records and prepare quarterly submissions.
However, accounting software is only as accurate as the information entered into it. Transactions still need to be reviewed correctly, personal expenses should be separated from business costs and relevant invoices and receipts should be retained.
If an accountant handles your Making Tax Digital submissions, it is still useful to provide records regularly rather than sending an entire year’s paperwork shortly before a deadline.
At EasyFig, we can help maintain your bookkeeping throughout the year, organise your digital records and prepare the information required for Making Tax Digital quarterly updates.
Need help managing MTD quarterly reporting? Speak with the EasyFig team today.