Making Tax Digital for Self-Employed UK: Everything You Need to Know

Making Tax Digital for Self-Employed UK: What You Need to Know

If you are self-employed in the UK, Making Tax Digital (MTD) is no longer a distant concern — it is a reality that affects how you manage, record, and submit your income tax. HMRC is rolling out MTD for Income Tax Self Assessment (ITSA), and understanding what it means for your business is essential to staying on the right side of the law.

What Is Making Tax Digital for Income Tax?

Making Tax Digital for ITSA is HMRC’s initiative to modernise the UK tax system. Instead of a single annual Self Assessment return, self-employed individuals and landlords will be required to:

Maintain digital records of all income and expenses
Submit quarterly updates to HMRC via MTD-compatible software
File an end-of-period statement (EOPS) confirming your figures
Submit a final declaration (replacing the traditional tax return)

This shift is designed to reduce errors, improve accuracy, and give both taxpayers and HMRC a clearer, more up-to-date picture of tax liabilities throughout the year.

Who Is Affected and When?

The rollout follows an income-based threshold:

From April 2026: Self-employed individuals and landlords with qualifying income over £50,000 must comply
From April 2027: Those with qualifying income over £30,000 must comply
From April 2028: Those with income over £20,000 are expected to be included

If your total income from self-employment and property reaches any of these thresholds, you are legally required to use MTD-compatible software and submit quarterly updates.

What Counts as Qualifying Income?

Qualifying income includes gross income from:

Self-employment (sole trader income before expenses)
UK property rental income

It does not include employment income, savings interest, or dividends for the purposes of determining your MTD threshold.

What You Need to Do Right Now

1. Check Your Income Threshold

Review your most recent Self Assessment return to determine whether your qualifying income meets the threshold for your mandatory start date.

2. Choose MTD-Compatible Software

HMRC requires the use of approved software. Look for tools that support:

Digital record-keeping for income and expenses
Direct API submission to HMRC
Quarterly update submissions
End-of-period statements and final declarations

3. Start Keeping Digital Records

Even before your mandatory start date, begin transitioning from paper or spreadsheets to a dedicated app or software solution. The earlier you start, the smoother the transition will be.

4. Understand the Quarterly Cycle

Under MTD for ITSA, your tax year is divided into four quarters. You will need to submit a summary of income and expenses for each quarter, typically within one month of the quarter ending.

Common Mistakes to Avoid

Waiting too long: Many self-employed people underestimate the time needed to set up compliant software and processes
Mixing personal and business transactions: Keep separate accounts for business income and expenditure
Ignoring cash transactions: All income must be digitally recorded, including cash payments
Assuming your accountant will handle everything: While accountants can help, you are ultimately responsible for maintaining digital records

How Invoice Guru Helps

Invoice Guru is designed with UK self-employed individuals in mind. It lets you create professional invoices, track expenses, and maintain the digital records required under MTD — all from your phone. With simple categorisation and clear summaries, staying compliant has never been more straightforward.

Making Tax Digital is a significant change, but with the right preparation and tools, self-employed individuals can manage the transition with confidence. InvoiceGuru is built to help UK self-employed professionals stay MTD-compliant with minimal effort — from digital record-keeping to quarterly submissions, all from your phone. Start early, choose the right software, and keep your records up to date throughout the year.