Self-employed workers and landlords affected by Making Tax Digital rules are being urged to check whether they need compatible software to comply with HMRC requirements.
HM Revenue and Customs (HMRC) has updated guidance explaining how people affected by Making Tax Digital for Income Tax can choose software to manage their tax records and submit updates online.
The new digital tax system officially started rolling out last month for some self-employed workers and landlords earning more than £50,000 annually. Making Tax Digital for Income Tax changes how some people report earnings to HMRC by requiring digital record keeping and quarterly updates instead of relying solely on a traditional annual Self Assessment tax return.
HMRC is providing a range of free support to help people prepare, including online guidance, webinars and videos. Those who genuinely cannot use digital tools can apply for an exemption, more details and guidance are available on GOV.UK.
READ MORE: New update £18,000 Personal Allowance to help people keep more of their ‘own money’READ MORE: One in seven sole traders consider quitting as HMRC tax shake-up starts
The rules currently apply to:
- self-employed workers
- sole traders
- landlords with qualifying income over £50,000
- This could include people working as:
- freelancers
- delivery drivers
- tradespeople
- consultants
- online sellers
- landlords with rental income
The £50,000 threshold is based on gross income, not profit.
HMRC has confirmed the scheme is due to expand further:
- people earning more than £30,000 are expected to join from April 2027
- those earning more than £20,000 are expected to join at a later stage
- Under the new system, affected taxpayers must:
- keep digital records
- use compatible software
- send quarterly income and expense updates to HMRC
- submit a final declaration each tax year
HMRC says software can help people:
- keep track of income and expenses
- manage records digitally
- submit updates directly to HMRC
- reduce mistakes linked to manual record keeping
The tax authority has now updated guidance explaining how people can choose software depending on their circumstances, including whether they:
- manage their own taxes
- use an accountant or tax agent
- need free or paid software
- want software for a single business or multiple income sources
Some products are designed specifically for landlords, while others combine bookkeeping, invoicing and tax reporting.
HMRC also said some people may be able to use “bridging software”, which links existing spreadsheets to the Making Tax Digital system.
The updated software guidance explains people should check whether products are compatible with Making Tax Digital for Income Tax before signing up.
HMRC has also published a step-by-step guide explaining how people can prepare for Making Tax Digital, including checking whether they qualify, choosing compatible software and signing up for the service. Making Tax Digital step-by-step guide
HMRC says the changes are designed to modernise the tax system and help reduce errors caused by inaccurate or incomplete record keeping.
People earning below the current threshold do not yet need to join the scheme unless they choose to do so voluntarily.
