HM Revenue and Customs (HMRC) is set to begin a major communication drive with UK households from next week, informing them of a fundamental shift in how income tax is reported. The change, known as Making Tax Digital for Income Tax, will transform the traditional annual self-assessment process into a more frequent, digital affair.
What is Changing with Your Tax Return?
Under the new system, the familiar once-a-year tax return will be replaced. Instead of a single administrative burden, taxpayers will submit information to HMRC in smaller chunks throughout the year. This will be done using recognised bookkeeping or accounting software, which could be an app on a smartphone or laptop.
The core of the new process involves sending quarterly updates to HMRC. These updates will provide a simple summary of income and expenses from sole trading and property income, sent directly from the user's software every three months.
How the New Digital System Will Work
HMRC has clarified that these quarterly submissions are not formal tax returns. A spokesperson stated: "These quarterly updates aren’t tax returns. They’re just simple summaries of how your business is doing, in four smaller chunks, pulled from your records."
For those keeping digital records as they go, submitting an update will be a quick process. Crucially, after each update, individuals will be able to view an estimate of their tax bill, allowing for better financial planning. The final deadline for paying any tax owed remains 31 January, with payment made through the GOV.UK portal or HMRC app as it is now.
It is important to note that taxpayers will still make final adjustments before their annual submission, such as declaring other income like bank interest or pensions, and claiming any eligible tax reliefs.
Preparations and the Government's Goal
HMRC has already begun its preparatory work, having written directly to affected customers in Spring 2025 to raise awareness. The tax office confirmed that the next phase of its campaign will launch shortly after the 31 January deadline.
The move is a key part of the UK government's strategy to modernise the tax system. HMRC adds that the goal is to close the tax gap – the difference between the tax that should be paid and what is actually collected – by making the process more efficient and accurate.
For millions of sole traders and landlords, adapting to this new digital routine will be essential for staying compliant with the UK's evolving tax obligations.
