Making Tax Digital: Survival guide (for the self-employed & landlords)

The way that some self-employed taxpayers report their business profits to HMRC is set to change under the Making Tax Digital (MTD) for business regime, when it begins to apply to Income Tax reporting.

This is a freeview 'At a glance' guide for the many self-employed taxpayers, company owners and property landlords who are unaware of HMRC's radical plans to transform the tax online filing system.

At a glance

Summary of Making Tax Digital (MTD) for Income Tax.

From April 2026, MTD for Income Tax will start to become mandatory for self-employed businesses and landlords, see Making Tax Digital: Index & timeline.
Under MTD for Income Tax, the Self Assessment tax return will be replaced by five new reporting obligations made during and after the tax year. There will be quarterly updates required and a year-end final declaration.
Non-UK resident or domiciled individuals will have to follow MTD where they have UK self-employment and/or UK property and meet the turnover threshold.
UK residents will have to follow MTD if they have foreign property income that meets the threshold (may be combined with other self-employment or UK property turnovers).
Digital records of all transactions will be needed. These will form the basis of the quarterly updates, which must include the information set out in HMRC's Update notice.
If you are not already using software for your record-keeping/accounting, you will need to learn how to use a spreadsheet or some type of accounting software or App which is MTD compliant.
You will need a reliable internet connection and a facility to store your electronic data.

MTD for Income Tax reporting requirements

Quarterly updates must be submitted to HMRC, with everyone adhering to the following quarter dates:

Quarter	Period	Deadline
1	6 April - 5 July	7th August
2	6 April - 5 October	7th November
3	6 April - 5 January	7th February
4	6 April - 5 April	7th May

An election (a calendar quatres election) can be made to change to calendar quarters, which will stay in place until withdrawn. The filing deadlines will remain the same.
A year end final declaration statement must be then made for the relevant period to finalise your income tax position. The information provided will then be used to generate your Self-Assessment tax bill for that tax year. This must be filed by 31 January following the relevant tax year unless later under s8 or s8A TMA 1970.

Tax payments

The tax liability will need to be paid by 31 January of the next year (as is currently the case).
You will be allowed to voluntarily pay your taxes as you go: the detail is still being decided.
Eventually, it is possible that you will be required to make four payments per year on account of tax.

Penalties

From April 2024, Volunteers participating in the testing phase of Making Tax Digital for Income Tax, will be subject to the new Late filing and Late payment penalties.
The regime will also apply:
- From April 2026, for taxpayers with business or property income over £50,000 per year (who are required to submit digital quarterly updates through MTD for Income Tax).
- From April 2027, for those with business or property income over £30,000.
These new penalty regimes use a point-based system for late submission and the late payment of tax liabilities.
Penalties already apply for errors in returns or documents and for late payment interest.
There will be no late submission penalties for missing quarterly updates during the testing phase of MTD for Income Tax.
See Penalties: Making Tax Digital

Exemptions

The digitally excluded exemption

If you are reading this guide you are probably online and this might not apply.
The digitally excluded are exempted from MTD if they have notified HMRC (to opt out) and either:
- the person or partner is a practising member of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records, or
- for any reason (including age, disability or location) it is not reasonably practicable for the person or partner to use electronic communications or to keep electronic records.

Income exemption

An individual will be exempt from MTD for Income Tax if:
- The digital requirements applied to a person for the prior 3 tax years, and
- The person's qualifying income for each of those three tax years was less than £30,000.

No National Insurance Number exemption

An individual will be exempt from MTD for Income Tax if on 31 January before the start of the tax year, that person does not have a National Insurance Number.

Qualifying care exemption

MTD for Income Tax will not apply to a person in respect of that person's provision for qualifying care.
Qualifying care includes foster care and shared lives care

Useful guides on this topic

Making Tax Digital: Index & timeline
When does Making Tax Digital (MTD) apply? What does Making Tax Digital really mean? How will it affect you? Does MTD mean quarterly reporting? Is my business exempted from Making Tax Digital?

Compare software for Making Tax Digital for Income Tax
What's the cheapest software I can use for Making Tax Digital for Income Tax? What is the best value software that I can use?

MTD: Toolkit for accountants
What is the current timetable for Making Tax Digital? How will it work? Which clients will be excluded? What planning needs to be undertaken?

Making Tax Digital: Survival guide (for the self-employed & landlords)
This is a freeview factsheet for the many self-employed taxpayers, company owners and property landlords who are unaware of HM Revenue and Custom's radical plans to transform the tax online filing system.

MTD: Income Tax Pilot Tool
Making Tax Digital (MTD) for Income Tax. Are you eligible to take part in the MTD Pilot?

Making Tax Digital: Pricing for Accountants
How much can you charge? How much should you charge?

VAT thresholds
Certain thresholds must be reached for either the registration or deregistration of VAT.

What will I need?

What information will I need?

Before you can sign up you will need Compatible software (see below).

First of all you will need your Government Gateway user ID and password (this is the one you use to file your Self Assessment return). You will have the option to create one when you sign up, if you do not have one already.

You will then need the following information in order to sign up:

Business name
Email address
National Insurance number
Business start dates and registered address
Accounting period
Accounting type such as cash or standard accounting
The tax year you would like to start using MTD for Income Tax

What equipment (hardware) and software or Apps will I need?

Your requirements depend on you, how you feel about technology and the nature of your business.
Every business is different.
If you use an accountant you can continue to do so.
You can delegate all your bookkeeping and online filing to an accountant, tax adviser or bookkeeper if you feel you cannot cope with this new system.
If you are one of the two million taxpayers who do not engage any professional help in reporting to HMRC you need to decide which system to use.
Accounting using a phone is not for everyone, choose what may be best for you from the table below.

See Compare software for Making Tax Digital for Income Tax

Equipment/system:	Phone or tablet apps	Computer/tablet & spreadsheet	Computer/tablet & accounting software
About you/your business. Not all will apply. chose the ones which may apply to you.	You own a smartphone or a tablet. You always have good internet access or a phone signal. You are happy to enter data onto your phone or tablet. You rarely need to issue paper invoices: your customers don’t want or expect receipts. Your expenses are pretty simple and you don’t expect to have many queries You don't give customers credit. You do not have many transactions in a tax year. You mainly receive your income in cash and payout your expenses in cash. You keep a separate business bank account. You like to do your bookkeeping every day.	You have access to a computer. You have internet access. Internet and phone signals may be restricted. You would rather use a big screen/don’t like/don’t use a phone for data entry. You are familiar with spreadsheets/you are not good with software/technology. You need a simple system to replace your manual bookkeeping system. You pay for goods using cash or bank card or credit card. Your income comes in by cash, cheque or online banking. You do quotes for customers or your customers like receiving invoices. You allow basic credit to customers. You have a business bank account or you use one bank account for business and private transactions.	You have a computer. You would rather use a big screen/don’t like to use a phone for data entry. You are OK with software. You are willing to learn new systems. You pay for goods using cash or bank card or credit card. Your income comes in by cash, cheque or online. You do quotes for customers or your customers like receiving invoices. You need credit control. You have a business bank account or you use one bank account for business and private transactions.
Present bookkeeping method(s) may include:	You keep receipts for payments, total up mileage per MOT certificate, maybe use a diary and total up everything at the end of the tax year using bank statements. You keep a paper cash book. You enter details on your tax return once a year.	You maintain a receipt book or keep a pile of issued invoices to record sales. You keep receipts in a box and enter them in batches during or at the end of the tax year. You manually check over your bank statements to check you have captured all the relevant income and expenses. You keep a paper cash book or use a spreadsheet to summarise your income and expenses. You enter details on your tax return once a year.	You do all your bookkeeping using your software. You generate an invoice for your sales from your software and you like to keep receipts on paper and then enter them in batches into the software. You might sometimes use a spreadsheet for summaries. You enter details on your tax return once a year.
Changes with Making Tax Digital	You have real-time recording of income/sales. You record all your income and expense on your phone and store the data in the cloud. Your App sends your bank receipts and payments to your summary for HMRC. You have to check each transaction to set up the system, you will need to manually enter your cash sales and purchases. Your App sends your figures to HMRC every quarter, You still have to make the usual accounting adjustments at the year-end in the final year-end report. It is best to avoid using a personal bank account for business. This will make your bank feed more complicated.	You use a spreadsheet instead of a paper book to: List your sales/invoices List and analyse your expenses. Your spreadsheet will now have to link to HMRC to allow quarterly reporting. Software will become available to do this as the software market grows. Depending on the results of its test pilots, HMRC may allow you to manually enter your quarterly figures. You still have to make the usual accounting adjustments at the year-end.	Your software will need to be updated to allow MTD filings. If your software does not have a bank feed then you can update to add that. You still have to make the usual accounting adjustments at the year-end. It is best to avoid using a personal bank account for business. This will make an automatic bank feed more complicated.
Verdict	Good for very small technically minded businesses with reliable internet who like entering data on phones/tablets daily.	Good for any size of business if you prefer a simple system where you can see all your transactions on a big screen and you don't have to do bookkeeping daily.	Good for any size of business if you prefer a system where you can see all your transactions on a big screen and you don't have to do bookkeeping daily, provided that you are happy to learn new software.

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