What is Making Tax Digital?
Making Tax Digital is a scheme from HMRC to bring the tax system into the 21st century by digitising the filings of VAT, Income Tax Self Assessment, and Corporation Tax.
Its purpose is to make tax returns easier, safer and more accurate for everyone.
Making Tax Digital so far…
Starting in 2019 Making Tax Digital was first implemented to VAT registered businesses. As of 1st April 2022, virtually all businesses who file VAT with HMRC are required to hold digital copies of their finances and use HMRC approved software to electronically file their VAT returns.
What’s next?
From 6th April 2026, sole traders and landlords with a gross income over £50,000 (that’s income before you take away any expenses) will need to submit their income and expenses to HMRC every quarter, using HMRC approved software.
From April 2027, Making Tax Digital for Income Tax will be expanded to include any sole traders and landlords with a gross income over £30,000.
From April 2028, any sole traders and landlords with a gross income over £20,000 will also need to use Making Tax Digital for Income Tax.
You can find more details from HMRC here
What will I need to do?
You (or your accountant) will still pay your tax bill twice a year, and you will still need to send a final update to HMRC at the end of the tax year.
However, instead of filing one bulky Self Assessment, you’ll have already reported your finances quarterly to HMRC, so all you will need to do is review everything to make sure it is correct, make any changes that you need to, then submit your end of year report to HMRC.
How can Monzo help me?
Monzo is partnering with Sage to build a tool that will allow sole trader business customers to manage their finances in accordance with HMRC regulations, then file this information directly with HMRC, all from the Monzo app! If you want to find out more, head to Home or the Manage Tax section in the app and sign up to our submission tool waitlist!
Monzo also has a range of features and tools to help you get the most out of banking with us and to help make filing your taxes digitally smooth and simple! Please tap/click here to find out more.
