INCOME TAX REPORTING
MAKING TAX DIGITAL FOR INCOME TAX: WHAT YOU NEED TO KNOW
The benefits
Article by Craig Ogilvie Director Making Tax Digital HM Revenue & Customs
If you’re a self-employed worker in transportation – whether you’re running a logistics business, taxi service, or otherwise – Making Tax Digital (MTD) for Income Tax is a major change to how you keep track of your business income and expenses throughout the year. It’s the biggest transformation since Self Assessment launched in 1997 and I believe this change will make your life easier.
What’s changing
From April 2026, if your turnover is above £50,000 from self-employment and property income combined, you’ll need to use MTD-compatible software to keep digital records for sending HMRC quarterly updates and your tax return. Those with turnover above £30,000 will follow from April 2027 and with turnover above £20,000, in April 2028.
Quarterly updates aren’t tax returns – they’re simple, unadjusted summaries of income and expenditure that your software generates automatically. Instead of cramming everything into January for the Self Assessment deadline, you’re spreading the load across the year. If you make any errors in a quarterly update, don’t worry, you can make corrections in the next update.
You’ll still submit a traditional Self Assessment for the previous tax year during your first year on MTD, but after that, everything can be handled through your software.
Why this matters
Many scramble in January to meet the Self Assessment deadline, often spending hours hunting for receipts or lost paperwork for the previous tax year. MTD for Income Tax will reduce this stress and extends what two million businesses already do successfully for VAT. A total of 69% of businesses surveyed experienced at least one benefit from MTD for VAT, and 67% said it reduced the potential for mistakes in their record keeping.
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l Real-time tax visibility: your software will estimate your tax as you go, helping you plan and budget better.
l Simplified record keeping: some software allows you to photograph receipts, log income as it comes in, and track expenses on the go – no more shoeboxes full of receipts or never-ending email searches.
l Automation:many of the software options categorise expenses, tally invoices and flag potential errors, making it easier to get your tax right the first time.
For those in transportation, it could mean better tracking of fuel costs, vehicle maintenance and other business expenses throughout the year.
Software options
There are both free and paid software options available. You can choose from our list of recognised providers, or use a combination of different software. The key is finding what works for you.
Getting ready now
The best way to prepare is to sign up for our voluntary testing programme. This gives you access to our dedicated MTD Customer Support Team and lets you familiarise yourself with the process before it becomes mandatory. If you use an agent, they can sign you up. It’s fantastic that so far, more than 1,300 taxpayers have submitted their first quarter update as part of the testing phase.
Start by looking at your current record-keeping methods. If you’re already using spreadsheets or basic accounting software, bridging software may be available that can connect these to MTD requirements.
Looking ahead
I’ve seen how MTD has helped VAT businesses become more efficient and accurate. Early feedback from our Income Tax testers has been positive, with many finding the system easy to use once they’re familiar with it.
We are committed to supporting you through this transition. Explore your software options, consider joining the testing programme, and don’t hesitate to ask for help.
OCTOBER 2025 PHTM
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