Here's a simple breakdown of Making Tax Digital (MTD) for the self-employed
What is it?
Making Tax Digital (MTD) is HMRC’s plan to move the tax system fully online, replacing the traditional annual Self Assessment tax return with more frequent digital reporting.
Who does it affect and when?
MTD for Income Tax will not currently apply where gross income (turnover) is less than £20,000.
When you need to start depends on your qualifying income (the total of your self-employment and property income — not wages from employment):
- From 6 April 2026 — if your qualifying income was over £50,000 in the 2024/25 tax year
- From 6 April 2027 — if your qualifying income was over £30,000
- From 6 April 2028 — if your qualifying income is over £20,000
Partnerships and incorporated companies are not currently affected.
What changes in practice?
Instead of one annual tax return, you’ll submit four quarterly updates during the tax year to HMRC, plus a digital end-of-year final declaration — similar to your current Self Assessment return.
Quarterly updates must be submitted to HMRC by the 7th of the month following the end of each quarter. The final declaration deadline remains 31 January, the same as the current Self Assessment deadline.
| Quarter | Tax quarterly period | Calendar quarterly period | Filing deadline |
| 1 | 6 April – 5 July | 1 April – 30 June | 7 August |
| 2 | 6 July – 5 October | 1 July – 30 September | 7 November |
| 3 | 6 October – 5 January | 1 October – 31 December | 7 February |
| 4 | 6 January – 5 April | 1 January – 31 March | 7 May |
What do you need to do?
- DONT PANIC!
- Keep digital records — paper receipts and manual bookkeeping won’t be sufficient. You’ll need MTD-compatible software to record transactions and send your updates to HMRC.
- Sign up — HMRC won’t sign you up automatically. They’ll contact you to confirm you need to get ready, but it’s your responsibility to sign up and prepare before your deadline.
- Check your software — tools like Xero, QuickBooks, or FreeAgent are examples of compatible options. There are also apps like Pie that can track your income and expenses. Spreadsheets can still be used but only with additional “bridging software” to connect to HMRC. https://www.gov.uk/guidance/find-software-that-works-with-making-tax-digital-for-income-tax
Penalties
A points-based penalty system is being introduced — miss a submission deadline and you’ll receive a penalty point. Accumulate too many points and a fine will follow. However, there will be no late submission penalties for missing quarterly updates for those joining MTD in April 2026 during the first year.
Exemptions
You can apply to HMRC for a “digitally excluded” exemption if age, disability, or location makes it unreasonable for you to use electronic records, or if you object to using computers on religious grounds.
If you’re self-employed and earning above the thresholds, you’ll soon need to report your income to HMRC four times a year using approved software, rather than once a year. Now is a good time to start looking at compatible software and getting your record-keeping in order.
https://makingtaxdigital.campaign.gov.uk/how-making-tax-digital-works/
