The Making Tax Digital rules in plain English

Once you are in Making Tax Digital, there are a handful of rules that govern how it all works. Here they are without the jargon.

1. You have to keep digital records

Your income and expenses have to be recorded digitally, in software or a spreadsheet, rather than on paper or in your head. The idea is that each transaction is captured digitally as you go, so there is no shoebox of receipts to wade through later.

2. You have to use approved software

You submit your updates through software that is on HMRC's recognised list. The old HMRC online filing page is not an option for these updates. Spreadsheets are allowed, but only if you connect them to HMRC using bridging software that creates what is called a digital link. A spreadsheet on its own will not send anything to HMRC.

3. Quarterly updates are just running totals

Each quarterly update is a simple summary of your income and expenses for the period. You are not doing full tax calculations or finalising anything, and no tax is due as a result of an update. Anything that is not quite right can be tidied up at the year-end, so the quarterly figures are working numbers rather than the final word.

A couple of useful eases

• ‍Under £90,000 turnover? You can report simple totals of income and expenses each quarter, without a detailed category breakdown.‍
• Tax-year or calendar quarters? By default your quarters follow the tax year, with deadlines of 7 August, 7  November, 7 February and 7 May. You can choose to line them up with calendar months instead, and the deadlines stay the same.

4. The Final Declaration ties it together

After your four updates, you finalise the year. You confirm your business figures, add any other income such as a wage or some dividends, claim your allowances and reliefs, and submit a single Final Declaration. This is the part that replaces your old Self Assessment return, and it is due by 31 January, the same as before.

5. Payments and penalties

Your tax payment dates do not change: 31 January and 31 July, as now. On penalties, 2026/27 is a soft-landing year, so those in the first phase will not pick up penalty points for late quarterly updates during that first year. That easement is narrow though. A late Final Declaration and any late payment can still be penalised, and the full points-based system applies from 2027/28.