Making Tax Digital (MTD) for Self-Employed 2026: Complete Guide

Making Tax Digital for Income Tax has staggered start dates based on income levels. If your combined self-employment and property income (before expenses) exceeds £50,000 in the 2024/25 tax year, you must comply from 6 April 2026. For income over £30,000, the start date is 6 April 2027. For income over £20,000, it's 6 April 2028.

Your "start date" is when you must be registered for MTD and ready to submit your first quarterly update within 1 month of your first quarter end.

Income for MTD purposes means your GROSS income before deducting any expenses. This includes:

• All self-employment trading income
• All property rental income
• Combined total of both sources

You do NOT include PAYE employment income, partnership income, or foster caring receipts in this calculation. If you start a new business or rental property mid-year, you must scale up the income as if you received it for the full 12 months when comparing to the thresholds.

Yes, but only if you're genuinely digitally excluded. This means it's not reasonable for you to use compatible software due to:

• No internet access or living in area with no broadband
• Insufficient computer skills despite reasonable efforts to learn
• Religious beliefs preventing use of technology
• Age, disability, or health condition making digital unreasonable
• Genuine inability to afford required technology

You MUST apply to HMRC and receive approval before your MTD start date. Simply preferring paper records or using an accountant does not qualify for exemption. As HMRC-supervised specialists, LOYALS can handle your exemption application for £300, with evidence preparation and HMRC submission included. Our approval rate is 95%+ because we know exactly what HMRC requires.

You need HMRC-recognised MTD-compatible software that can:

• Keep digital business records
• Connect to HMRC via API (digital link)
• Submit quarterly updates electronically
• Generate End of Period Statements
• File Final Declarations

Popular options include QuickBooks, Xero, FreeAgent, and Sage. Costs range from £5-50/month depending on features. LOYALS clients get software setup and management included in their £200 per quarter MTD compliance package, plus we handle all setup, training, and submissions. You never need to touch the software yourself.

Technically yes, but with major limitations. You CAN use spreadsheets for record-keeping, BUT you must use bridging software to create the digital link to HMRC for submissions. You cannot manually copy figures from spreadsheets to HMRC - this violates MTD digital link requirements.

Most accountants (including LOYALS) recommend dedicated MTD software instead of the spreadsheet + bridging software approach, as it's simpler, more reliable, and often cheaper. Our £200 per quarter package includes proper MTD software setup and management, eliminating the need for complex spreadsheet bridges.

Quarterly updates are summaries of your business income and expenses submitted to HMRC every three months. You choose your quarter dates when registering (they don't have to align with the tax year). Each update must be submitted within 1 month of the quarter end.

For example, if your quarters are Jan-Mar, Apr-Jun, Jul-Sep, Oct-Dec, you'd submit:

• Q1 update by 30 April (for Jan-Mar)
• Q2 update by 31 July (for Apr-Jun)
• Q3 update by 31 October (for Jul-Sep)
• Q4 update by 31 January (for Oct-Dec)

LOYALS handles all quarterly submissions for clients, ensuring deadlines are never missed. Our £200 per quarter fee covers all four quarterly submissions plus monthly maintenance and year-round support.

No, MTD is in addition to Self Assessment, not instead of it. Under MTD, you'll:

• Submit 4 quarterly updates throughout the year
• Submit an End of Period Statement after your accounting period ends
• Still file a Final Declaration by 31 January (equivalent to current Self Assessment)

Think of quarterly updates as progress reports to HMRC, with the Final Declaration being the official tax return where your actual tax bill is calculated. The quarterly updates don't calculate final tax - they just keep HMRC informed of your year-to-date position.

Missing MTD deadlines triggers escalating penalties:

• £200 penalty for initial failure to submit on time
• £10 per day (up to 90 days = £900) for continued failure
• After 6 months: £300 or 5% of tax due (whichever is greater)
• After 12 months: Additional £300 or 5% of tax due
• Deliberate errors: Up to 100% of tax due as penalty
• Interest charged on any late tax payments

LOYALS clients are covered by our penalty protection guarantee - if we miss a deadline due to our error, we pay any penalties incurred. With our £200 per quarter compliance package, you have zero penalty risk. As HMRC-supervised specialists, we guarantee on-time submissions.

MTD costs depend on whether you handle it yourself or use professional help:

DIY Approach:

• Software: £5-50/month (£60-600/year)
• Training courses: £100-500
• Your time: 5-10 hours/month
• Risk of errors and penalties
• Stress of quarterly deadlines

LOYALS Professional Service (£200/quarter = £800/year):

• Complete MTD software setup included
• Monthly maintenance & record-keeping
• All quarterly submissions handled
• Year-round HMRC communication
• On-demand help whenever needed
• Penalty protection guarantee
• HMRC-supervised specialists
• Zero time commitment from you

Most clients find professional support costs less than DIY when considering software, time, training, and penalty risk. Plus, you live stress-free knowing HMRC-supervised experts handle everything.

No, you register once for MTD and include both income sources. Your quarterly updates will have separate sections for self-employment income/expenses and property income/expenses. The combined total determines your MTD start date threshold.

However, you'll need software that supports both business types. Most MTD software handles this, but it's worth checking. LOYALS ensures you have appropriate software and correctly set up both income streams in your MTD account.

Once you're required to use MTD, you must continue using it even if your income drops below the threshold. You cannot "opt out" of MTD just because income decreases.

However, if your income drops significantly and you believe this creates genuine hardship or you now qualify as digitally excluded, you could apply for exemption going forward. LOYALS can assess whether exemption might be appropriate for your changed circumstances and handle the application if so.

Yes! This is exactly what LOYALS's MTD compliance package provides. For £200 per quarter, we:

• Set up and manage your MTD software
• Handle monthly maintenance & record-keeping
• Record your income and expenses
• Submit all quarterly updates on time
• Handle End of Period Statements
• File Final Declarations
• Deal with all HMRC correspondence
• Provide on-demand help whenever you need it

You simply send us invoices, receipts, and bank statements monthly (or give us digital access), and we handle everything else. Many clients never even see their MTD software - we manage it completely behind the scenes. As one of the few HMRC-supervised MTD specialists, we guarantee penalty-free compliance.

No, Making Tax Digital for Income Tax only applies to sole traders and landlords filing Self Assessment. Limited companies already file digitally via Corporation Tax returns and won't be affected by MTD for Income Tax.

However, if you're a director who pays yourself dividends or salary, and you also have separate self-employment or rental income exceeding the thresholds, then your personal Self Assessment would be subject to MTD for those income sources.

LOYALS serves 500+ clients across Westminster, Camden, Islington, Hackney, Tower Hamlets, City of London, Southwark, Lambeth, Wandsworth, Hammersmith and Fulham, Kensington and Chelsea, and all other London boroughs. As one of the few accounting firms fully supervised by HMRC for MTD implementation, our services include:

• In-person consultations at our King's Cross office
• Remote setup via video calls (most clients prefer this)
• Extended support hours: Mon-Fri 9am-6pm, Sat-Sun 10am-5pm
• Phone, email, and video support included
• Same-day response to urgent queries
• Local knowledge of London business challenges
• Direct HMRC liaison as supervised specialists

Whether you're a construction contractor in Barking, a landlord in Richmond, or a freelancer in Greenwich, we provide the same exceptional MTD support. MTD compliance £200/quarter or exemption applications £300 one-off.