You’re fresh into 2026, the post-Christmas slump has hit and now you’re having to engage brain about ‘Making Tax Digital’. Not ideal.
Thankfully, the team at the Lighthouse Charity have put together a simple, easy-to-read guide outlining some key points about the changes. Let’s break down the government jargon and figure out what ‘Making Tax Digital’ means.
Does This Apply to Me (Or Can I Stop Reading?)
If your annual income is likely to be £50,000 or over at January’s self-assessment and that entire income is made through self-employment (including those working under the Construction Industry Scheme/CIS) or through property, then yes, this change applies to you. This is the total income, before deducting expenses.
Note: This initiative is being phased in, so it might apply to you at a later date. By 2027 the threshold will be £30,000, and by 2028 it will be £20,000.
(Still confused? Click here for a handy eligibility calculator.)
What’s the Change All About?
In the simplest of terms, ‘Making Tax Digital’ is a government initiative and legal requirement to move your records from paper to screen, so to speak. It aims to improve accuracy and efficiency in record-keeping by making the process automatic – leaving more time to actually go out and earn.
Tell Me More…
From 6th April onwards, you will need to process your figures using software that is compatible with ‘Making Tax Digital’. So far, some of the frontrunners include Xero, QuickBooks, Sage Accounting, FreeAgent and Clear Books.
When we say ‘process your figures’, we mean:
– Create digital records of your self-employment and property income
– Keep track of your expenses automatically
– Send quarterly updates to HMRC (with strict deadlines applied)
– Submit your annual tax return
You will also need to actively sign up for the scheme on the government website. Do yourself a favour and have all your details ready to input.
Did You Say ‘Quarterly Updates’?
Yes, this is one of the key changes. While this sounds like a lot more work, it aims to spread the load throughout the year and reduce the annual scramble in January. The updates aren’t final! And errors can be corrected as you go along.
Why Is This Good for Me?
Changing how things have always been done always creates a little friction, but let’s consider the ways this can benefit you.
- Better accuracy – fewer expensive mistakes
- Time efficiency – making the process automatic saves you valuable time
- Clarity – quarterly updates offer a clear picture of your tax obligations so fewer uncomfortable surprises!
- Compliance – rest easily knowing that your accounts comply with HMRC’s requirements, helping to avoid any nasty penalties
I’m Still Lost
Don’t panic, many of the changes we’re talking about won’t make sense until you’ve got the software in place. They are professional programs that are designed to be easy to use, and ‘Making Tax Digital’ will be baked right in.
If paperwork isn’t your thing and the process sounds overwhelming to you, that’s what we’re here for. Lighthouse offers a free, 24/7 helpline service for people in construction and their families. We can help with your emotional, physical, and financial wellbeing. Please don’t hesitate to call on 0345 605 1956 (UK) or 1800 939 122 (ROI). Or click here to access our Wellbeing Academy Making Tax Digital training.
