Making Tax Digital for Self Assessments: What Small Business Owners Need to Know
Making tax digital for self assessment is being introduced in stages, with self employed individuals and landlords with a turnover over £50,000 being the first wave of people affected.
Who Will Be Affected by Making Tax Digital for Income Tax?
For sole traders and landlords with a turnover between £30,000 and £50,000 the go live date is April 2027.
For sole traders and landlords with a turnover between £20,000 and £30,000 it will be April 2028.
Why the 2024/25 Tax Return Matters
It is turnover not profit that is important with these thresholds. The turnover being looked at is the turnover for the 2024/25 tax year, which is the year we have just finished. HMRC will review your tax returns for the 2024/25 tax year to see if you will need to be registered for MTD by April 2026, which is even more reason to get this year’s tax return completed way ahead of the January deadline.
With digital tax returns in the UK coming soon, in this blog we’ll guide you through the process and tell you everything you need to know to make ‘Making Tax Digital for Self Assessments’ easy.
What Does Making Tax Digital Actually Mean?
Making Tax Digital means you will need to submit quarterly returns to HMRC telling them your turnover and expenses every quarter, and then complete your self assessment tax return like usual at the end of the tax year.
This means there will now be 5 submissions for each tax year. To do these quarterly submissions you have to be on an online software like Xero or Freeagent to submit these returns to HMRC.
You will still only pay tax in January and July, tax will not become payable quarterly.
Making Tax Digital Deadlines for Quarterly Submissions
You can either manage these HMRC quarterly tax submissions yourself, keeping the bookkeeping up to date in your chosen software and doing the submissions or we can provide MTD help for small businesses, doing the bookkeeping and submissions for you. Learn more about our services here.
If you are already on an online bookkeeping software the transition will be relatively simple for you, especially if you are already VAT registered as very little will change.
MTD Quarterly Deadlines
The deadlines for submitting quarterly updates will be the same for everyone who has to follow the MTD for Income Tax rules. From the start of the tax year on 6th April, these Making Tax Digital deadlines are:
- 7th August
- 7th November
- 7th February
- 7th May
What Software Do You Need for Making Tax Digital?
Best Software for Sole Traders and Landlords
Our personal bookkeeping software for MTD favorites are Freeagent which costs £19+VAT a month for Sole Traders, or Xero which is £16+VAT for its lowest package. Both companies often run offers to bring the price down which is worth keeping an eye on as you consider signing up. Quickbooks is also available at £10+VAT per month.
These are the three softwares we work with, if you wish to complete your own submissions you can work with other providers.
Should You Do MTD Submissions Yourself or Get Help?
If you think you are going to be affected from April 2026 then we’d suggest getting onto software between January and March 2026 so you are ready for the launch in April 2026.
Ultimately, we can’t avoid this new system so best to be prepared and get ready for it the best we can as it’s not going anywhere!
We will provide all the support we can and appreciate the annoyance of the unavoidable additional costs coming for small business owners with these latest changes.
Need Help Getting Ready for MTD?
If you think Making Tax Digital might apply to you, or want to chat through your options, we’re here to help. Contact us to get started early and reduce the stress later on.
FAQs
What is Making Tax Digital for self-assessment?
Making Tax Digital (MTD) for self-assessment means that sole traders and landlords over a certain turnover threshold will need to keep digital records and submit quarterly updates to HMRC about their income and expenses. This is in addition to the usual annual self-assessment tax return. The goal is to make tax reporting more efficient and transparent.
When does Making Tax Digital start for sole traders?
MTD for Income Tax starts in April 2026 for sole traders and landlords with a turnover above £50,000 (based on the 2024/25 tax return). Those earning between £30,000 and £50,000 will follow in April 2027, and those earning £20,000 to £30,000 will be included from April 2028. Turnover, not profit, is what HMRC will assess.
What software do I need for MTD?
To meet MTD requirements, you’ll need HMRC-compatible accounting software. We recommend Freeagent, Xero, or QuickBooks, all of which allow you to keep your records digitally and submit your quarterly returns. If you’re not yet on software, it’s a good idea to switch before MTD applies to you.
Do I need to pay tax quarterly under MTD?
No. Although you’ll need to submit quarterly updates to HMRC, your payment schedule won’t change. You’ll still pay your tax in January and July, just as you do now. MTD changes the frequency of submissions, not the payment deadlines.
How do I know if I need to register for Making Tax Digital?
HMRC will determine if you’re required to follow MTD rules based on your turnover in the 2024/25 tax year. If you’re a sole trader or landlord earning over £50,000, you’ll need to register and comply with MTD from April 2026.
What happens if I don’t comply with MTD?
Failing to comply with MTD requirements could result in penalties from HMRC. It’s important to start preparing early by using approved software and maintaining digital records to avoid non-compliance.
Can I still use spreadsheets for MTD?
In some cases, yes — but only if they’re combined with bridging software that can submit data to HMRC digitally. However, using cloud-based accounting software like Xero, Freeagent, or QuickBooks is the simplest and most reliable option.
Is MTD just for VAT?
No. While MTD started with VAT-registered businesses, it’s now being expanded to include income tax for sole traders and landlords. This is known as Making Tax Digital for Income Tax Self Assessment (MTD for ITSA).
Do I still need to file a tax return with MTD?
Yes. Even with quarterly submissions under MTD, you’ll still need to file a final self-assessment tax return each year. This final return reconciles the figures reported in the quarterly updates.
Can my accountant submit MTD returns for me?
Absolutely. Your accountant can manage both your quarterly MTD submissions and your annual tax return, helping ensure you remain compliant and stress-free throughout the year.
