Does Making Tax Digital Apply to the Self-Employed?
What Is Making Tax Digital (MTD)?
It’s about sending your tax info online using MTD-compatible software. It means, if you wish to file your tax return, you are required to use software that is approved by the HMRC. We are already filing VAT returns for businesses in the UK using MTD compatible software. It helps reduce errors and makes your tax process smoother. This change will affect sole traders and landlords, especially those with income from business or property.
The goal is simple: keep digital records, send quarterly updates to HMRC, and submit a final declaration at the end of the tax year.
Does Making Tax Digital Apply to the Self-Employed?
Yes, it does. If you are self-employed and earn more than the MTD threshold, you must follow the tax digital MTD rules. This includes reporting income, expenses, and submitting tax returns through approved software.
At present, only VAT-registered businesses are required to follow MTD rules. But starting April 2026, MTD will also apply to those with taxable income over £50,000. From April 2027, it will include people earning between £30,000 and £50,000. It means if you are self-employed and earning less than £50K, you are not required to worry about MTD, except landlords.
MTD for VAT: What Self-Employed Need to Know
If you’re self-employed and registered for VAT, you must already be using MTD-compatible software. This applies if your turnover is above the VAT threshold. Even if you are under the threshold but voluntarily VAT registered, you must still use bridging software or cloud accounting to meet MTD rules.
You must:
- Keep digital records
- Submit VAT returns through MTD software
- Stick to deadlines and avoid penalties
Popular tools like QuickBooks, Xero, and FreeAgent support MTD for VAT. At Tax Care, we provide free MTD compliant software for our clients.
MTD for Income Tax Self Assessment (ITSA)
MTD for Income Tax is coming into effect in stages:
- From April 2026, self-employed people and landlords earning more than £50,000 must join MTD.
- From April 2027, it will include those earning more than £30,000.
This includes income from self-employment and property income. If your total income (not profit) crosses the threshold, you must follow MTD rules.
You will need to:
- File income and expenses four times in a year.
- Keep digital records of income and expenses
- Send quarterly updates to HMRC
- Submit a final declaration replacing the traditional Self Assessment tax return
Who Is Exempt from MTD?
Not everyone needs to join. You may be exempt if:
- You cannot use digital tools due to age or a disability
- You live in a remote location with no internet access
- Your income is below £30,000 (for MTD ITSA)
- You apply to HMRC and get formal exemption approval
What Software Do You Need?
To follow MTD rules, you must use MTD-compatible software. This software helps you:
- Track your income and expenses
- Send quarterly updates to HMRC
- Submit your final yearly report
Looking for MTD software that fits your business?
Get help from a trusted accountant at Tax Care – we’ll help you choose the right tool and stay compliant.
Benefits of MTD for Self-Employed
MTD might seem like more work, but it brings real benefits:
- As you will be filing your tax return four times in a year, you will be more up to date with your finances.
- Less chance of errors
- Real-time view of your taxes
- Fewer surprises at the end of the tax year
- Easier to manage National Insurance and other tax contributions
It will also help self-employed individuals improve the chance of getting loan or mortgages.
Furthermore, digital tax tools also save time and reduce paperwork.
What Happens if I Don’t Comply with MTD?
From the MTD start date, if you don’t follow the rules, HMRC may give you penalty points. These points can lead to fines if you keep missing deadlines.
To avoid this, make sure you:
- Keep digital records from the start of the tax year
- Send your updates on time
- Use the right software
How to Get Ready for MTD as a Self-Employed Person
Here’s a simple checklist:
- Check your income – if it’s over £50,000 (from April 2026), you need MTD
- Pick MTD-compatible software – such as Xero or QuickBooks or contact Tax Care for further help.
- Set up digital record keeping – track all your income and expenses
- Register for MTD for Income Tax (when the time comes)
- Talk to an accountant for extra support
Read More: MTD for Corporation Tax
Do I need to register for MTD if I only have property income?
Yes, if your total taxable income from property and self-employment is over the threshold.
Can I still use spreadsheets?
Yes, but only if you use bridging software to submit data to HMRC.
What about National Insurance contributions?
MTD will help HMRC calculate NI in real time based on your digital tax records.
Do I still need to file a Self Assessment tax return?
No. You’ll submit a final declaration instead under MTD rules.
Conclusion
MTD will certainly change the we file the tax returns for the self-employed individuals. According to a senior tax professional from Tax Care Accountants, “MTD could be an extra burden for self-employed individuals. Because it will push them to purchase expensive accounting software and pay more to their accountants”. However, MTD will certainly help self-employed individuals to improve their financial management, increase the chance of getting mortgages or loans.
Making Tax Digital is not just for big companies, it affects sole traders and landlords too. With deadlines starting in April 2026, now’s the time to get ready. If you earn over the income threshold, you’ll need to switch to digital tools and report quarterly.
Let us help you stay stress-free and compliant with all MTD rules.
- Free setup consultation
- MTD software guidance
- Ongoing tax support
Visit Tax Care accountants in Birmingham or call us today to get started.
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