Making Tax Digital, or MTD is HMRC's idea to modernise the current way of reporting income for businesses and landlords. The intention is to have quarterly reporting of profits with final year end declarations to calculate the final tax bill. MTD for VAT came in a few years ago and was mandated from April 2022 and was largely straight forward as most businesses would have been reporting quarterly with some sort of digital record and should be straight forward for those businesses when the changes come in for Income Tax.

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Essentially, MTD is all about how you keep your business records and when you tell HMRC the information. From April 2024 you must keep a digital record of all the transactions in your business. A digital record can be a spreadsheet, or dedicated software like Xero. If you're using a spreadsheet you will need special "bridging software" to submit the information to HMRC. This information must be submitted to HMRC every 3 months (Quarter) and you will have 1 month after the quarter end to do this.

 

If you have multiple sole trade businesses or a sole trade business and a rental property business you will need to make a submission for each business.