Making tax digital
The self-employed must file returns more often and use approved software, says Paul Lewis
From April, self-employed sole traders or landlords whose turnover – not profit – is more than £50,000 a year must file their business accounts four times a year and still file a final self-assessment tax return by the next 31 January. At the moment, they just file that final self-assessment form. The new five-form system is called Making Tax Digital (MTD) and from April 2027 it will extend to businesses with a turnover above £30,000, and then above £20,000 from April 2028. The Government claims MTD will avoid errors and raise an extra £3 billion in tax by 2030/31. Small businesses say it will cost them money in new software and lost time filing five times a year rather than one.
The new system goes beyond just the need to file more often. From this tax year, self-employed people will no longer be able to complete their income tax forms manually. Their accounts must be kept digitally, and they must use approved software to do the quarterly filing automatically. Accounting software firms are advertising widely, implying people should buy – or usually rent – expensive accounting software. But anyone who already keep their accounts on spreadsheets can file in an easier way. They should look for what is called approved bridging software. Every quarter the trader tells it to take data from their spreadsheets then complete and submit the quarterly return. The annual return must also be filed automatically after adding in personal income such as pensions, savings interest, dividends, wages, earnings, and any other taxable income.
Many bridging software packages have been approved by HMRC and they are much less expensive than full accounting packages. One called My Tax Digital is completely free. But they all require the trader to ensure their spreadsheets create the data HMRC needs, which the software then takes automatically to complete the quarterly form. Taxpayers must still check and, if necessary, amend the totals before the form is sent. The deadline for the quarterlies is a month and seven days after the quarter ends. So the first quarter return of 2026/27, April to June, must be filed by 7 August. For more information, search ‘find MTD software’ at gov.uk search. There is not much time to sort it out.