This page answers FAQs about Making Tax Digital (MTD) for Income Tax and what it means for freelance members.

1. Who needs to use MTD — and from when?

MTD for Income Tax becomes mandatory:

From 6 April 2026 if your qualifying income is over £50,000, based on your 2024/25 tax return
From 6 April 2027 if your qualifying income is over £30,000, based on your 2025/26 tax return
From 6 April 2028 if qualifying income is over £20,000 based on 2026/27

HMRC will then assess the tax return due prior to the current tax year to determine when you join.

2. What counts as “qualifying income”?

Qualifying income includes:

Gross income from self-employment
Gross income from UK and foreign property

It does not include:

PAYE employment income
Partnership income
Dividends
State or private pensions
Savings interest

Only income from sole trader and property businesses is relevant for MTD Income Tax thresholds.

3. Will HMRC contact me?

HMRC will write to you if your latest Self Assessment shows you’re above the threshold.

However, you are responsible for checking whether you are in scope — even if you do not receive a letter.

4. What are quarterly updates?

Under MTD, you must send quarterly summaries of income and expenses using compatible software.

Important points:

These are not full tax returns
You do not pay tax quarterly
You still submit your final declaration by 31 January

Standard quarterly deadlines:

7 August
7 November
7 February
7 May

5. How accurate do quarterly updates need to be?

Quarterly updates are cumulative (year-to-date totals).

If you discover an error:

Correct your digital records
The correction will be reflected in your next quarterly update

You do not need to resubmit earlier updates. Final corrections can be made before submitting your year-end declaration.

6. What if I have more than one trade or property?

You must submit separate quarterly updates for:

Each self-employed trade
UK property businesses
Foreign property businesses (where applicable)

7. What software do I need?

HMRC does not provide free MTD software directly.

You must use:

Commercial software from HMRC’s recognised list
Or a spreadsheet with bridging software that creates the required digital link to HMRC

If you already use Excel, bridging software may allow you to continue using it.

8. Are there free or low-cost options?

HMRC works with software providers to ensure a range of free or low-cost products are available, but it does not endorse specific providers.

Before choosing software:

Check HMRC’s software finder tool
Compare features
Confirm compatibility with your accountant (if you use one)

9. Is MTD software tax deductible?

Generally, business expenses that are wholly and exclusively for your trade are allowable.

This can include:

Accounting software subscriptions
Digital bookkeeping tools

If you use software partly for personal purposes, you must apportion the cost.

Consult your accountant for advice specific to your situation.

10. Do I need to upload receipts every quarter?

No. Quarterly updates include category totals only, not individual receipts.

However, you must keep digital records. This could include:

Bank feeds
Scanned receipts
Spreadsheets (with digital links)

HMRC may request evidence if needed.

11. What if my income falls below the threshold?

Once you are within MTD:

You must generally remain in it
You can opt out only after your qualifying income falls below the threshold for three consecutive tax years

If your trade or property business ceases, notify HMRC.

12. What happens if I’m late?

MTD uses a points-based penalty system.

You receive a £200 fine once you reach the penalty threshold (4 points for missed deadline of quarterly updates on tax returns).

For the first mandated year (2026/27):

No late submission penalty points will apply for quarterly updates
Late payment penalties and interest still apply
The year-end return remains fully in scope

13. Will MTD change how I pay tax?

No. MTD changes how you report, not how you pay.

The 31 January deadline remains
Payments on Account continue as normal

14. What if I’m working abroad or on long contracts?

You are still required to file quarterly updates on time.

If you anticipate access issues:

Use software reminders
Arrange for an accountant or agent to submit on your behalf

First-year easements reduce the risk of late submission points for quarterly updates, but deadlines still apply.

15. Can my accountant handle this?

Yes. An accountant (agent) can:

Maintain digital records
Submit quarterly updates
File your final declaration

Check that your chosen software supports your agent’s workflow.

16. What if I can’t reasonably use digital tools?

You may qualify for digital exclusion if, for example:

Age or disability makes digital reporting impractical
You live in an area with poor internet access
Your religious beliefs prevent digital use

You must apply to HMRC for an exemption before your mandated start date. HMRC aims to respond within approximately 28 days.

17. Can I align quarters with the calendar year?

Yes. You can elect to use calendar month quarters ending:

30 June
30 September
31 December
31 March

This may help align with VAT quarters (depending on your VAT stagger).

18. What does HMRC do with quarterly data?

Quarterly updates:

Provide HMRC with more regular information
Help you see in-year tax estimates
Support cashflow planning

They are not final tax calculations. Your final declaration determines your official tax position.

19. Does MTD apply to limited companies?

No. MTD for Income Tax applies to:

Sole traders
Individual landlords

MTD for Corporation Tax will apply to limited companies in future (date to be confirmed).

Further information and official guidance

You can find detailed information on GOV.UK:

Making Tax Digital FAQs