How Making Tax Digital works
What you need to do
You’ll log receipts and invoices little and often
To do this, you’ll use recognised bookkeeping or accounting software that works with Making Tax Digital for Income Tax – such as an app on your phone or laptop.
This will make tax admin easier in the long run as MTD software can tally up invoices for you.
Send quarterly updates This is a quick way to let HMRC know about your income and expenses from sole trading and property – every three months, straight from your software.
These quarterly updates aren’t tax returns
They’re just simple summaries of how your business is doing, in four smaller chunks, pulled from your records.
If you’re logging information as you go along, quarterly updates will simply be the touch of a button.
You’ll be able to view up-to-date cash flow, fix any errors and see an estimate of your tax bill after sending each update. This is useful for business planning.
You won’t pay four tax bills a year
The deadline for paying your tax will still be 31 January.
You’ll pay this by signing in to your online tax account through GOV.UK or on the HMRC app – just like now.
But you’ll be able to see your predicted tax bill all year round, removing any January surprises.
When you’ll send your quarterly updates
These are the standard update periods and deadlines, which line up with the tax year (6 April to 5 April). Your deadlines are the same regardless of if you use standard or calendar update periods.
| Update period | Update deadline |
| 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 | 7 May |
If you prefer, you can choose to match your update periods to the calendar year.
You’ll still submit a tax return Software can tally up the whole year from your quarterly updates. It will pull these into your tax return for you. So there’s less form filling.
You’ll check everything looks right
You still make any adjustments before submitting your tax return, such as including other sources of income like bank interest or pensions. And you can claim tax reliefs if you’re eligible.
All good? Then you’ll tap submit by 31 January
This will send your tax return to HMRC, straight from the software. Job done.
HMRC will use this information to build your tax bill
The new system won’t change the way you pay Income Tax or the dates you need to pay it.
In your first year using the new service, you’ll still need to fill out a Self Assessment tax return for the previous tax year the usual way
That’s because you won’t have sent quarterly updates for the previous tax year.
You can sign in and submit your Self Assessment tax return through your HMRC online tax account. You’ll still need to do this by 31 January.
Think of this as a transition to the new way of doing things
By the following January, you’ll be able to do everything straight from your software. This will make the process simpler in the long run.
View up-to-date
cash flow
Useful for
business planning
No more scrambling
for lost receipts
Log them as you go,
instead of all at once
See your predicted
tax bill, year round
Goodbye to any
January surprises
Make tax admin
easier
MTD software can tally up
invoices for you
Fix any errors you spot
as you go
So you don’t overpay
or underpay tax
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