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.

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.

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

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.

Monzo has a range of features and tools to help you get the most out of banking with us and to help make filing your Income Tax Self Assessment smooth and simple, such as attaching photos of receipts to transactions, monthly cash flow reports, categorising transactions, using Pots to set aside money to pay taxes and more!