Busting myths, and making life easier

 

If you’ve heard whispers about Making Tax Digital and felt your stress levels rise, you’re not alone. There’s a lot of confusing (and sometimes downright scary) information out there.

Okay, Making Tax Digital for Income Tax is a significant change, yes. But it’s not the end of the world. And if you start preparing now, you’ll be absolutely fine.

This page cuts through the noise and gives you the facts, the timelines, and the practical steps you need to get ready. No jargon. No panic. Just clear, honest guidance from people who genuinely want to help.

Who’s exempt?

Some people don’t need to use MTD, including:

• Those who are “digitally excluded” (due to age, disability, location, or religious beliefs)
• Those under the income thresholds
• Trusts, estates, and non-resident companies
• Partnerships (will be brought in later – date TBC)
• Those who use the residence/remittance basis pages (SA109) of the tax return – delayed until at least April 2027

If you think you might be digitally excluded, you can apply to HMRC for an exemption.

But if you’re reading this on a screen right now, you’re probably not digitally excluded. The exemption is designed for people who genuinely can’t access or use digital technology, not just people who’d prefer not to!

Here’s something we hear all the time from clients: “Am I putting enough money away for tax?”

It’s the number one question business owners ask us. Is it 20%? 30%? How much should I be saving? You’re never quite sure, and that uncertainty can keep you up at night.

This is where getting digital from the start genuinely helps.

Real-time peace of mind

Modern accounting software like FreeAgent shows you an estimate of your tax liability as the year progresses. There’s a little tax tracker at the bottom of the screen that updates as you add your income and expenses.

No more guessing. No more lying awake wondering if you’ve saved enough. You can actually see where you stand.

Better business decisions, when they matter

When you can see your finances in real-time throughout the year, you’re not waiting until January to discover how your business is actually doing. You can spot problems early, celebrate wins as they happen, and make decisions when there’s still time to adjust.

Regular financial check-ins mean you’re running your business based on facts, not feelings.

Less year-end stress

Instead of facing a mountain of receipts and the January panic we all know too well, you’re spreading the admin throughout the year in smaller, manageable chunks. Many businesses who’ve moved to quarterly reporting have found it genuinely less stressful than the annual scramble.

The bottom line on going digital

If you’re just starting out, assume you’re going to hit those thresholds at some point. You may as well get yourself set up with digital tools now – especially with Making Tax Digital coming in for more businesses from April 2026.

Yes, there’s a learning curve. But you’re hopefully a bit more tech-comfortable than some of the business owners who’ve been doing things the same way for decades. And the tools available now are genuinely designed for business owners, not accountants.

The simple version

Making Tax Digital (MTD) for Income Tax is a new way of reporting your income and expenses to HMRC. Instead of doing one big Self-Assessment tax return at the end of the year, you’ll:

• Keep your records digitally (using accounting software or apps)
• Send quarterly updates to HMRC throughout the year (just income and expenses – you’re not calculating tax four times a year)
• Submit a final declaration by 31 January (like you do now)

Think of it like this: instead of stuffing all your receipts in a shoebox and dealing with them in a January panic, you’re spreading the admin throughout the year in smaller, more manageable chunks.

The payment deadlines don’t change – you still pay your tax by the same dates as now. And the amount of tax you pay doesn’t change either. It’s just the way you report things that’s different.

Does this apply to you?

MTD for Income Tax is being introduced in phases:

From April 2026

Sole traders and landlords with combined gross income over £50,000 from self-employment and/or property must use MTD.

From April 2027

The threshold drops to £30,000.

From April 2028

The threshold drops further to £20,000.

 

Important: This is your gross income (total sales/revenue), not your profit.

So if you’re a freelancer who invoiced £55,000 last year – even if your actual profit after expenses was £25,000 – you’d need to comply from April 2026.

HMRC will look at your 2024/25 tax return (filed by 31 January 2026) to decide if you need to join from April 2026. If you’re close to the threshold, they might write to you.

The practical stuff

If you need to comply with MTD, here’s what changes:

 

1. Keep digital records

No more paper-only records or spreadsheets that don’t link to HMRC. You’ll need to use MTD-compatible software to record your income and expenses as they happen.

(Software like Xero and FreeAgent – which we already recommend – are MTD-compatible. If you’re already using them, you’re most of the way there.)

2. Send quarterly updates

Four times a year, you’ll submit a summary of your income and expenses to HMRC. These are due:

• 7 August (for April – June)
• 7 November (for July – September)
• 7 February (for October – December)
• 7 May (for January – March)

Don’t panic: these aren’t full tax calculations. You’re just sending a summary of what you’ve earned and spent. Your software can do the heavy lifting.

3. Submit a final declaration

By 31 January (same as now), you’ll submit your final declaration through your software. This is where you confirm all your figures, add any other income (like employed income or savings), and include any reliefs or adjustments.

4. Pay your tax

The payment deadlines don’t change. You’ll still pay:

• Payments on account (31 January and 31 July)
• Balancing payment (31 January following the tax year)

 

Same as always.

MTD-compatible options

You’ll need accounting software that’s compatible with Making Tax Digital. The good news? There are loads of options, including some free ones for straightforward businesses.

Our recommendations

FreeAgent

This is our top recommendation for most sole traders and freelancers and landlord. It’s designed specifically for small businesses and is genuinely user-friendly.

The best bit? It calculates your tax bill as you go, with that tax estimate tracker showing you what you’re likely to owe throughout the year. For straightforward self-employed income, this is brilliant.

Even better: if you bank with NatWest, RBS, or can open a METTLE account, you can get FreeAgent completely free. For everyone else, you can see the fees here. 

Xero

We use Xero for most of our limited company client work because it’s brilliant for seeing finances in real-time and handles more complex setups well. Xero has wider integration capabilities and more sophisticated reporting features than Freeagent (although theirs is expanding)

They have brought out a version for sole traders for MTD called Xero Simple at £7 per month plus VAT. This is cheaper than the Freeagent software but doesn’t (yet?) estimate your tax due throughout the year. They also sometimes offer free trials or introductory discounts, so it’s worth checking.

Digital bank add-ons

If you already use a digital bank like Starling or Monzo for your business, it’s worth checking if they offer MTD-compatible add-ons.

Starling, for example, has HMRC-recognised tools coming soon that will help you create, store and correct digital records, send quarterly updates, and submit your tax return – all from within your banking app.

These can work well if you’ve got a single bank account and relatively straightforward finances. Just check what’s included and what costs extra.

What we don’t recommend

QuickBooks. We just don’t use it, so we can’t support you with it. Stick with FreeAgent or Xero and we’ll be able to help you if things go wonky.

Already using software?

If you’re already using FreeAgent, Xero, or most other cloud accounting software, you’re probably fine. Check with your software provider to confirm it’s MTD-compatible (most are).

Still using spreadsheets?

You’ll need to switch to proper accounting software for MTD. Spreadsheets alone won’t cut it anymore. But honestly? This is a good thing. Once you’re set up, you’ll wonder why you didn’t make the switch sooner.

HMRC has a full list of MTD-compatible software on their website, including free options for businesses with simple affairs.

What to do right now

Don’t wait until April 2026 to start thinking about this. Here’s what you should do:

 

Now (January 2026)

• Check if you’ll be affected: Look at your 2024/25 income. Are you over £50,000 gross? Or are you over £30,000, so you will be included from April 2027?
• Choose your software: If you’re not already using MTD-compatible software, start researching and testing options. Most offer free trials.
• Start recording digitally: Even if you’re not mandated yet, getting into the habit now means you won’t be scrambling in 2026.
• Get help if you need it: Whether that’s booking a guidance session, or joining our newsletter for updates, make sure you’ve got support lined up.

 

Early 2026 (before April)

• Sign up for MTD: If you’re mandated from April 2026, you’ll need to formally register for MTD with HMRC. Either we or your software provider can help with this.
• Make sure your records are up to date: Get everything clean and organised before you start sending quarterly updates.
• Check your first quarterly deadline: Your first update will be due 7 August 2026 (for the quarter ending 5 July).

 

Throughout 2026/27

• Submit your quarterly updates on time: Set reminders. Don’t leave it to the last minute.
• Keep your records up to date: The more regularly you do this, the easier each quarterly update will be.
• And remember, you still need to submit your 25/26 self-assessment the current way.
• Ask for help when you need it: Seriously. Don’t struggle in silence.

Let’s address some of the scary things you might have heard:

 

“It’s going to cost me loads”

Not necessarily. There are free software options for simple businesses. And if you’re already using accounting software, you probably won’t need to change anything.

“I’ll have to do my tax return four times a year”

No. You’re just sending summaries of income and expenses. You’re not calculating tax or submitting full returns quarterly. The software does most of the work.

“HMRC’s systems will be a disaster”

Possibly. (We’re realistic here.) The system has been tested with VAT for years, so it’s not completely new. But yes, there might be teething problems. That’s why starting early and having good software is important.

“I’ll get penalties if I make mistakes”

MTD does have a penalty system for late submissions. But it’s not designed to catch you out – it’s designed to encourage regular, timely reporting. If you keep on top of things and ask for help when you need it, you’ll be fine.

“This is just HMRC being difficult”

Actually, once you’re used to it, spreading your admin throughout the year is genuinely easier than the January panic. Many businesses who’ve adopted MTD for VAT have found it helpful. (We know. We were surprised too.)

 

The real truth? It’s a change. Change is uncomfortable. But it’s not insurmountable, and you absolutely don’t have to figure it out alone.

Depending on what kind of support you need, we’ve got three ways to help:

 

Do It Yourself (with our support)

Perfect if you want to manage MTD yourself but need resources and guidance.

• Monthly newsletter with MTD updates
• Free downloadable checklists and guides (coming soon)
• Software recommendations
• Blog posts walking through the process

 

Done With You

Great if you want to do the work but need expert backup and reassurance.

• Software setup support
• Quarterly update reviews
• MTD preparation coaching
• Someone to ask when you’re stuck

 

Done For You

Ideal if you’d rather hand the whole thing over to us.

• We handle all your quarterly updates
• We manage your year-end submission
• You never have to think about MTD
• Complete peace of mind

 

Join our waiting room to explore your options.

What people actually ask

 

Q: What if my income goes above the threshold partway through the year?

A: You join MTD from the start of the third tax year after you first exceed the threshold (unless you exceed it immediately before 6 April 2025, in which case you join from 6 April 2026). HMRC will notify you.

Q: I’m a landlord with just one property. Do I really need to do this?

A: If your gross rental income is over the threshold, yes. Even for one property. But the good news is that property income is often quite straightforward to record.

Q: What if I have both employed income and self-employment?

A: MTD only applies to your self-employment and property income. Your employed income still gets reported in the final declaration, same as now.

Q: Can my accountant do this for me?

A: Absolutely. If you have an accountant (like us!) or an agent, they can handle all your MTD obligations on your behalf (with your permission).

Q: What happens if I’m late with a quarterly update?

A: There’s a penalty system, similar to MTD for VAT. But it’s designed to be proportionate – you won’t get hammered for one late submission. That said, it’s much less stressful to just stay on top of things.

Q: Do I need to send bank statements to HMRC?

A: No. You’re just sending summaries of income and expenses, not bank statements or receipts. (Though you do need to keep those for your own records.)

Q: What if I’m self-employed and have a limited company?

A: MTD for Income Tax only applies to sole traders and landlords. Limited companies have different reporting requirements (which aren’t changing with MTD for Income Tax).

Q: Can I still use a paper diary?

A: For your own notes, absolutely. But your official records need to be digital and in MTD-compatible software. You can jot things in a diary and then transfer them to your software – many people work that way.

Helpful Resources

Where to find more information

Official HMRC guidance

makingtaxdigital.campaign.gov.uk

The official government site. Useful, though sometimes a bit dry.

Software providers and Digital Banks

Most accounting software websites and digital banks (such as Monzo and Starling) have MTD guides specific to their platform/ software. Worth reading if you already use or are considering a particular software.

Our blog

We’ll be publishing regular posts about MTD

Making Tax Digital for Income Tax is happening.

 

If you’re a sole trader or landlord earning over £50,000, you’ll need to comply from April 2026.

Yes, it’s a change. Yes, there’ll be a learning curve. But it’s genuinely not the nightmare some headlines make it out to be.

If you:

• Start preparing now (not in March 2026)
• Choose good software that works for your brain
• Keep your records reasonably up to date
• Ask for help when you need it

…you’ll be absolutely fine.

And remember: you don’t have to figure this out alone.

Whether you want DIY resources, expert coaching, or someone to handle the whole thing for you, we’re here to help you fear less about the finance stuff.

That includes Making Tax Digital.