Making Tax Digital (MTD)

Making Tax Digital (MTD) is the government’s initiative to implement a fully digital tax system in the UK, where taxpayers keep digital records and use MTD-compatible software or ‘bridges’ to make tax submissions electronically.

The tax calendar will change with a new requirement to submit quarterly income/expense updates directly to HMRC.

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What this means for self employed individuals

Who is effected by MTD for Income Tax (ITSA)?

MTD for Income Tax will come into effect from 6 April 2026 and all self-employed individuals and landlords with total business or property income (turnover, not profit) above £50,000 will need to comply with the new rules. Those with income above £30,000 will need to follow the rules from April 2027.

What are the Quarterly updates?

HMRC will require you to submit quarterly reports about your self employment, with details of your total income, expenses and profit/loss for the relevant period. These run in quarters throughout the year, and are shown on the table below. You must submit your details by the 7th of the following month after each quarter end.

What are the rules for MTD?

As well as quarterly reporting (we’ll cover this in a moment), you’ll also need to keep digital business records, and MTD-compliant software, such as MalgraBooks’ accounting system. You’ll need to finalise reports and send these to HMRC in a short period at the end of each quarter.

Is this the end of the annual tax return?

No. In addition to quarterly reporting, you’ll need to submit a ‘final declaration’ at the end of the year, this replaces the tax return. It allows you to finalise any details from the quarterly reporting, and then provide the final declaration to confirm the details submitted.

Each quarter runs from April and continues through the year.

Submissions through Pulse need to be completed by the deadlines shown here to ensure records are received by HMRC.

Period covered Filing deadline
Quarterly update 1 1 April to 30 June 31 July
Quarterly update 2 1 April to 30 September 31 October
Quarterly update 3 1 April to 31 December 31 January
Quarterly update 4 1 April to 31 March 30 April

We're ready for the new rules

MalgraBooks has been supporting self employed consultants since 2013, and with the new reporting structures coming into place, we’re ready to help support our members with these new changes.

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FAQs

When does Making Tax Digital (MTD) Start?

When you need to start using Making Tax Digital for Income Tax depends on your qualifying income within a tax year. If your qualifying income is over:

  • £50,000 for the 2024 to 2025 tax year, you will need to use it from 6 April 2026
  • £30,000 for the 2025 to 2026 tax year, you will need to use it from 6 April 2027
  • £20,000 for the 2026 to 2027 tax year, you will need to use it from 6 April 2028

Note: Qualifying income is any monies received before expenses are taken away, otherwise known as Turnover. This is usually box 15 (SA103F) or box 9 (SA103S).

Can I be exempt from MTD (i.e. not have to do it)?

There are only certain situations where you can be exempt from MTD

  • You have a health condition, or a disability which prevents you from using a computer, a smartphone or accounting software

  • Your age affects your ability to use digital tools and systems

  • You live in an area where internet access is not reliable, and you cannot reasonably use the internet elsewhere

  • Your religion prevents the use of technology, which you comply with in your personal life, too

  • You have specific tax circumstances that qualify for a temporary exemption, such as issues with ongoing claims or a HMRC approved reason

  • You’re already exempt from MTD for VAT returns because you are digitally excluded, and your circumstances haven’t changed

If you believe you are exempt from MTD, you’ll need to contact HMRC.

What if I forget to submit a quarterly return?

HMRC’s new Making Tax Digital service brings in a new system of issuing ‘penalty points’ when a submission is late. Just like speeding fines, the points based system relates to the individual (or business if a limited company) and after so many points, financial penalties apply.

When submitted on time, no penalty points are applied – however if late, you’ll receive one point. After four points are reached, a penalty of £200 is charged.

What if I start self employment mid-way through the year?

Where your business starts during the year, HMRC will annualise the turnover data provided, grossing it up to provide an annual amount.

For example, if you begin self employment in October, and your quarterly data for October/November/December is £8,000, HMRC will annualise this to £32,000 to assume that it would be the total income for the year.

What if I fall under the threshold later on?

Once you’re mandated to be a part of MTD, you cannot be exempt from reporting until your income falls below the threshold for 3 consecutive tax years.

Which MalgraBooks packages include MTD?

All packages are eligible for MTD, however is available as an ‘add on’ for our Essentials package.

When do I need to submit quarterly returns?

You can view the deadlines using the table above. We recommend that you update your accounts monthly, and then confirm the details are ready for reporting using our online tool. This will verify the figures and submit direct to HMRC electronically.

Will MalgraBooks send the annual final declaration?

If you’re on our Premium service, this is included automatically.

If you’re on Essentials, you can add the self assessment tax return add-on module.

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