Making Tax Digital for Freelancers, Consultants and Small Business Owners
What it is, why it matters, and how to get ready for it
If you’re self-employed, a landlord, or run a small business, you’ve probably heard about Making Tax Digital (MTD). But what exactly does it mean for you — and what should you be doing now to get ready? Let’s break it down.
What is Making Tax Digital?
Making Tax Digital is HMRC’s initiative to make tax administration more effective, efficient, and easier for taxpayers.
It’s about keeping up-to-date digital business records and submitting information to HMRC using compatible software, instead of paper forms or manual returns.
The aim is simple: reduce errors, save time, and make tax management more transparent — especially for self-employed people and landlords.
Who is affected and when?
Who is affected
Currently, only individuals (sole traders and landlords) are in scope — partnerships are not yet mandated.
The stages
The rollout is happening in stages, so not everyone needs to join at the same time.
You can choose to sign up to MTD early to get used to digital record-keeping before it becomes mandatory. This can be helpful if you’re close to the threshold or want to avoid a rushed transition. (GOV.UK – MTD for Income Tax)
How to calculate your gross (qualifying) income
Combine the totals from all your self-employment and property income sources.
This figure — before expenses or tax — is your qualifying income.
(It does not include employment income, dividends, or pensions.)
Example calculation of gross income:
Jo is a self-employed consultant who has multiple streams of income over a financial year:
Income from renting out a UK house she part-owns (property income) – £15,000
Income from small business consultancy – £20,000
Income from referral fees & partnerships – £2,000
Income from corporate contracts – £20,000
Total gross income: £57,000
Her expenses and pension contributions are £15,600, but this is irrelevant for the MTD threshold because expenses affect net income, not gross.
Her net income is £41,400 — but Jo’s gross income is £57,000, so she must join MTD in April 2026.
Important dates & thresholds
From 6 April 2026: If your total qualifying income is over £50,000, you must join MTD.
From 6 April 2027: Threshold drops to £30,000.
From 6 April 2028: The government plans to extend this to those earning over £20,000 (pending confirmation).
If you have more than one business, HMRC looks at your total income across all businesses and properties — not each one individually.
Important: You must maintain separate digital records and submit quarterly returns for each business or property income source.
What you need to do
1. Understand your current position and check if you qualify for exemption status
Some individuals can apply for exemption (e.g., on grounds of disability, age, or location), or fall under special categories such as foster carers. (GOV.UK – Apply for MTD exemption)
2. Choose or check that you are using MTD-compatible software
You must keep and submit records digitally using HMRC-approved software or a compatible spreadsheet linked via an API.
Popular options include: Xero, QuickBooks, Zoho, and others.
FreeAgent* is also HMRC-approved software, and it’s the one I use in my own business. It’s very straightforward, with excellent guides and support.
I got FreeAgent when I signed up for a Mettle bank account, which includes the software at no cost (saving up to £150 a year). If you sign up using my referral code, you’ll also receive £50 from Mettle.*
Find out more on the GOV.UK website about approved software options.
Please consider my final thoughts before making a selection.
3. Start keeping digital records now
Record income and expenses digitally as they happen to make quarterly updates smooth and accurate.
4. Understand and diarise your reporting schedule
If you need to join from April 2026, add the key dates to your diary now.
Quarterly submissions are due on the 7th of August, November, February and May, followed by a Final Declaration by 31 January.
HMRC’s points-based penalty system means repeated late submissions can lead to fines — so staying organised will really help.
5. Ask your accountant for help
Your accountant can help you sign up, choose software, and manage quarterly updates.
If you don’t have an accountant and want “one-off advice”, companies like TaxFix (formerly TaxScouts) can help.
Why it matters
This isn’t just another compliance box to tick — it’s an opportunity to modernise how you manage your business finances and get clearer insights into cash flow.
MTD reduces errors and spreads admin throughout the year, rather than leaving everything to one stressful period (often Christmas, January, or deadline day!).
Even if you’re not yet required to join, signing up early can make the transition much easier — and help you avoid a last-minute scramble later.
Final thoughts
Making Tax Digital is here to stay, and it’s evolving to make tax simpler — not harder. By going digital now, you’ll save yourself time, stress, and potential penalties later.
And remember: my advice is to consider the bigger picture and how any new software will integrate or align with your existing processes and software. Don’t just jump into another piece of software before planning it out.
Use this opportunity to audit your business — my free e-book or the full version can help and alleviate the overwhelm.
If you already use software for sales, marketing or project delivery, check the “integrations” section — is there an existing integration with approved MTD software?
If you’re thinking of adding or changing software, look at what integrations are available with the tools you’re considering.
Try the reverse engineering approach too — start with the accounting software’s integrations and work backwards.
You can also consider using tools like Zapier to connect software, rather than choosing a platform solely based on built-in integrations.
Disclaimers
This blog is not exhaustive and should not be used as a substitute for obtaining your own legal or financial advice. It is intended as a general overview only. We do not accept liability for any loss, costs, damage or expense incurred as a result of relying on the information provided.
Affiliate links (*)
FreeAgent Discount Code
30-day free trial and 10% off your subscription.
Already signed up for a free trial? You can still use the referral discount.
Enter my code when you subscribe: 4qe0xx6b
I do not receive money from FreeAgent if you use this link or code.
Mettle Referral Code: WL58D
Affiliate transparency: If you open a qualifying Mettle account and meet their terms, we both receive £50 from Mettle.
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