Making Tax Digital (MTD) for Income Tax – guide for the self-employed

There’s one certainty when it comes to running a business, and that’s the need to file a tax return.

That will never go away.

In fact, with the new Making Tax Digital (MTD) for Income Tax now being introduced from April 2026, the frequency of filing returns will increase dramatically for many people.

MTD for Income Tax is being introduced from April 2026 and will require many self-employed people to keep digital records and submit quarterly updates, rather than a single annual tax return. 

In this Making Tax Digital Q&A, we asked veteran Chartered Accountant and franchisor Elaine Clark to explain MTD and highlight the key things the self-employed need to be aware of.

What is Making Tax Digital (MTD)?

MTD plays a crucial role in the government’s efforts to minimise the tax gap, which is the discrepancy between the tax due and the tax actually paid. HMRC intend to do this by requiring businesses and individuals to:

• keep digital records
• use software that works with Making Tax Digital (like Xero).
• submit updates every quarter, bringing the tax system closer to real-time

What does MTD mean in reality?

The first thing to state about the new MTD for income tax regime is that it applies to self-employed business owners and landlords who complete an annual self-assessment tax return.

It doesn’t apply to limited companies, although HMRC may introduce a different regime for companies in the future.

When do the new MTD rules apply?

The new regime applies to self-employed business owners and landlords with a qualifying income over:

The thresholds are based on total business income (turnover), not profit.

• £50,000 from April 2026
• £30,000 from April 2027

The government has said that those with income between £20,000 and £30,000 will also be brought into the new rules during the current Parliament, although precise dates for this have not been given. See the latest MTD deadlines and rollout.

What are the new rules?

Individuals who fall into the new system will be required to keep electronic accounting records using suitable software or a spreadsheet, and to make quarterly updates (also known as returns) and a final declaration to HMRC of their income and expenditure.

See our guide to Making Tax Digital for the self-employed for more detail.

When do I need to submit the updates?

Under the new system, cumulative updates will need to be submitted to the tax quarter end dates, which are different to the calendar quarters being:

HMRC will allow updates to be filed for calendar quarter-end dates by making a calendar quarter election, to make things easier. This means that the filing dates would be:

Final Declaration

In addition to the quarterly reporting, a final declaration needs to be filed to the usual self assessment deadline of 31st January following the end of the tax year.

The final declaration, which will also include other income not reported as part of the MTD returns such as savings interest, dividends etc, will replace the usual self assessment tax return for individuals falling within the new regime.

What about paying tax?

At the moment, the deadline for paying tax remains unchanged at 31st January following the end of the tax year, as do the payments on account due on 31st January and 31st July.

How will I know if the new rules apply to me?

HMRC will write to those who need to follow the new rules. Initially, they will look at those with a qualifying income over £50,000 on the Self-Assessment tax return for the 2024 to 2025 tax year.

In reality, this means that you may not have much time to prepare if you wait until HMRC contacts you. Preparing for the new rules in advance, rather than waiting for a letter, may be a better approach.

What does this mean for my record keeping?

MTD for income tax means that those who fall within the new regime will need to be on top of their record keeping, i.e. their bookkeeping and accounting.

Is there anything that I can do to make the reporting easier?

The answer to this is most definitely yes for sole trader business owners who have a turnover of less than £90,000.

They can follow what is called the “three line approach” to filing the new quarterly returns, as they can with their current self assessment tax returns.

In reality, this means that you only need to enter two figures on your quarterly update, being the total income and the total costs – the third figure of profit (income less costs) is calculated by the system. This aligns with simplified expenses.

Accounts from Zempler, Monzo, Mettle, or Tide are brilliant for this purpose, as they even have built-in bookkeeping apps. See our guide to sole trader business bank accounts.

Do I need to use an accountant?

For anyone unsure about the new rules or whether they fall under the regime, the best advice is to consult a reputable accountant. See whether you need an accountant.

What about current self assessments?

Any self assessments due under the old rules will still need to be filed. See our guide to Self Assessment tax returns.