Panic – or – Calm?

If I said to you that the government were going to make everyone take a test every 10 years in order to retain their driving licence, what would be your reaction?  Laugh  🤣, cry  😭, panic 😨, swear 🤬, be bored 😴, see an opportunity  🤑, or something else maybe?

Making Tax Digital, which HMRC is now talking about in earnest having been in the pipeline for a number of years, likewise causes most, if not all, of these emotions.

And as is always the case when something new and significant approaches, a few people immediately saw an opportunity to take advantage.

Adverts started appearing across the press, adverts which, rather than seeking to allay our fears, are specifically designed to make us panic about Making Tax Digital and make us nervous about how it is going to make our lives more complicated… unless we start using their software, app, service or dodgy accountancy firm.

Hopefully, I’m going to put your mind at rest.

Being confronted with a new requirement such as Making Tax Digital can be overwhelming and scary, but rather than be overwhelmed or scared, I decided not to panic but to ignore the doomsayers and seek help instead.

So I attended a presentation by Dan Hill, business owner and CEO of MyDriveTime, the original business management solution on the requirements of Making Tax Digital and how MyDriveTime is going to interface to it.

How does it work now?

Being self-employed, we have to pay tax. 😠  And it is our responsibility rather than our employer’s!

Historically that has always been via a tax return, once a year, and the government believe that if I’m clever enough to run my own business I must be clever enough to work out how much tax I owe them.

Now, like New Year’s resolutions, I have the best intentions at the beginning of the new tax year, aiming to complete my tax return by the end of April and be totally on top of my tax affairs right from the start.

In reality, I’m never that diligent and that means that I’m too often rushing to complete tax returns by the deadline.

How is it going to work in future?

Under the new system, we will have to submit electronic records every quarter to HMRC declaring our income and expenditure for that quarter.

These are not a replacement for our annual tax return.

We’ll still have to do that but these quarterly updates will divide the required work into smaller chunks each with their own deadline.

This makes our tax liabilities clearer and makes our tax return easier to complete.  It also helps HMRC to keep more informed about their likely tax receipts.

HMRC have already identified deadlines for each of the quarterly updates so it will be very clear what we have to do and when we have to do it by.

What about in practice?

“So I can just download my accounts from MyDriveTime to an Excel spreadsheet as I do at the moment and send that to HMRC every 3 months?  That’s a doddle.”

Well it would be if we could do that but we can’t.  HMRC will not accept quarterly updates in any old format – instead they have partnered with a number of suppliers e.g., Xero, who provide an interface to HMRC’s systems and we must use one of them.

“But that means I have to put the information in MyDriveTime and also in some other bit of software that I have to learn?  That’s a right pain!”

Yes, it certainly would be BUT not if MyDriveTime does that bit for us.  After all if we already put our information into MyDriveTime, we don’t really want to do anything other than ‘push the button’ to send it all to HMRC, via the partner, in the correct format.

Furthermore, MyDriveTime won’t let you ‘forget’ to do the submission and it will remind you in good time that the deadline is approaching.

It is likely that we will have to set up the interface to submit the return but we’ll only have to do this once, prior to the first submission, and MyDriveTime will help us to do that.

 

I don’t use MyDriveTime for recording my business finances

If you are using MyDriveTime’s business management app to control your diary, students and lessons but not using the money section, you are missing out and making things more difficult than they need to be.

“But can I really trust MyDriveTime’s figures?”  Absolutely!  Instructors and accountants have been using and trusting MyDriveTime’s money section for years and we’re not going to drop the ball now.

If you don’t use MyDriveTime’s money section, Making Tax Digital is going to make it even more difficult.  Whether you have your own accounts package, spreadsheet, knowledgeable friend or a file full of pieces of paper, the requirements of Making Tax Digital are going to be the same for you as everyone else.

You are going to have to prepare the figures in the right format and then find an HMRC partner to submit them for you.

Furthermore, the responsibility for getting the updates in on time will lie firmly with you.

When does it start?

The government love moving the goalposts when it suits them and HMRC are no exception; things may change.

However, at this moment, Making Tax Digital will be necessary from the beginning of the 2026 tax year i.e., 6th April 2026 if your qualifying income, that is gross income from self-employment and property exceeds £50,000.

If your gross income is higher than £30,000 then the start date is April 2027 and if its more than £20,000 then the start date is April 2028.

 

I’m new to all this…

If you have never done a self-assessment tax return, because you are just starting out in business, HMRC cannot know whether you qualify for Making Tax Digital.

Therefore you will have to register for self-assessment and file your first tax return in the normal way following the normal deadlines.  This applies even if you don’t think that you are or will be subject to the qualifying income specified above.

HMRC will then work out what needs to happen and let you know.

In the meantime, using MyDriveTime to record your income and expenditure means that you’ll be ready whatever HMRC say.

So what’s next?

For the moment, if you already record your income and expenditure in MyDriveTime, you don’t need to do anything differently, whatever anyone else is telling you and if you qualify for Making Tax Digital in the 2026/2027 financial year, HMRC will let you know.

MyDriveTime is working on a range of self-service and partnership options which will be available to help you by the time your first quarterly submission is due in July.  So you can choose how you manage things.

As things develop, we will let everyone know.  If you have any questions, reach out.

It wouldn’t be good business software if we just left you to your own devices at the time you need us most – and MyDriveTime is excellent business software!

Of course, if you don’t currently enter your income and expenses in MyDriveTime, you need to consider very carefully what you are going to do when HMRC start asking for quarterly updates…

…and finally

As always, we believe in doing things properly so we will make sure that we provide the best solutions and we will let you know in good time how these are going to work in practice.  That way you will be able to familiarise yourself with the most appropriate solution for you before it becomes a legal requirement and as usual we will be here to help you make this transition.

If you find any issues with this blog or anything else, please contact us at support@mydrivetime.co.uk.