MAKING TAX DIGITAL
Four updates a year
instead of one panic.
Making Tax Digital requires digital record-keeping and submission from compatible software. It is already mandatory for VAT-registered businesses, and it is phasing in for sole traders and landlords above an income threshold, replacing the annual return with quarterly updates.
WHAT YOU GET
The six things worth understanding.
Digital records, not digital returns
The requirement is that the records themselves are kept in software, with an unbroken chain to HMRC. Filing was already electronic; the records are the change.
Quarterly updates are not tax bills
For Income Tax, four summaries a year replace one annual return, plus a final declaration. Payment dates do not change, and this is the most misunderstood part of it.
Digital links, not copy and paste
Data has to move between systems electronically. Retyping a figure from a spreadsheet into a portal breaks the chain, which is the requirement most people fall foul of.
Gross income, not profit
The threshold test looks at income before expenses, and combines self-employment with property. Plenty of people are in scope while believing they are not.
Current records make it trivial
If your books are reconciled as you go, a quarterly update is a button. If you reconstruct the year each January, four reconstructions a year is not a workable plan.
Check the dates yourself
Thresholds and start dates have been revised more than once. We point at gov.uk rather than quoting a figure that may already have moved.
WHY IT ADDS UP
Why this is a bookkeeping change, not a tax change.
Nothing about how much tax you pay or when you pay it changes here. What changes is how often you have to be able to show your figures — and that turns a habit into a requirement. A business that reconciles as it goes will barely notice. A business that reconstructs the year from a carrier bag each January will find the same reconstruction demanded four times a year, which is the real reason to sort the records out before the deadline rather than after it.
COMMON QUESTIONS
Questions people ask.
Is Bizzle Making Tax Digital compatible software?
For VAT, yes: digital records, digital links and filing through HMRC's API. For Income Tax the records and quarterly figures are kept ready continuously. Check HMRC's own list of recognised software for the current position on any product, ours included, before relying on it.
Does Making Tax Digital apply to limited companies?
Only through VAT, for now. MTD for VAT already applies to any VAT-registered business, company or not. MTD for Income Tax is for sole traders and landlords, and corporation tax is not in the current programme. gov.uk is the place to confirm what is planned.
What happens if I ignore it?
For VAT, filing without compatible software is already not permitted, and penalties apply for late or missing submissions. For Income Tax, a points-based penalty system attaches to missed quarterly updates. The practical consequence is worse: four reconstructions a year instead of one.
Do I need an accountant to do the quarterly updates?
No. If the records are kept as you go, a quarterly update is a review and a button, which is the point of doing it from software. Many people keep their accountant for the final declaration and the judgement calls, and give them a free login so they can see the quarters as they happen.
BY REGIME