Making Tax Digital is live – vital next steps for the self-employed

Making Tax Digital (MTD) for Income Tax has officially arrived, and for many self-employed individuals and landlords, this marks a significant shift in how tax is managed and reported.

If you’re feeling unsure about what this means in practice, you’re not alone. Moving from a once-a-year Self Assessment to more regular digital reporting is a big change but once you understand what’s required, it becomes far more manageable.

Here, Mike Parkes from !Coconut and GoSimple Tax explains what you should have done already, what happens next, and what to do if something goes wrong.

3 things you should have done already

Now that MTD is live, there are a few key steps you should already have in place.

1. Registering with HMRC

If your income meets the MTD threshold, you should have signed up through HMRC.

From April 2026, MTD for Income Tax applies to individuals with gross incomeover £50,000 from self-employment and/or property. Those earning over £30,000 are expected to follow from April 2027.

MTD doesn’t apply automatically, so you must register before you can start submitting updates. However you may get a letter from HMRC if the tax body thinks it will apply to you. 

2. Choosing compatible software

Under MTD rules, keeping manual records (like spreadsheets alone) is no longer enough unless they’re linked to compatible software.

You’ll need a digital solution that can:

• record income and expenses 
• submit updates directly to HMRC 
• maintain digital links between records 

The key requirement is that your records are fully digital and transferable without manual re-entry.

3. Starting to keep digital records

You should now be recording your business income and expenses digitally, in real time or as close to it as possible.

This includes:

• sales or income received 
• business expenses 
• dates and details for each transaction 

The goal is simple: keep everything accurate and up to date throughout the year, rather than scrambling at the end.

What happens next?

Once you’re set up, the focus shifts to maintaining your records and submitting quarterly updates.

Keeping your records organised

You’ll still need to categorise your income and expenses within your software to keep your records accurate and useful.

However, it’s important to understand that HMRC does not see this level of detail in your quarterly updates.

Categorisation helps you:

• keep accurate totals 
• stay organised 
• make end-of-year adjustments easier 

But HMRC only receives summary figures, not a breakdown of individual categories or transactions.

Submitting your first quarterly update

Under MTD, instead of submitting one annual tax return, you’ll send updates every quarter (every three months).

Each update includes:

• total income for the period 
• total expenses for the period 

It’s not a final tax calculation, just a snapshot of your position at that point in the year.

What HMRC will see (and what it won’t)

Understanding what’s shared with HMRC can help ease concerns.

HMRC will see:

• total income for the quarter 
• total expenses for the quarter 

HMRC won’t see:

• individual transactions 
• expense categories 
• receipts or invoices 

What happens at the end of the year?

Quarterly updates don’t replace the need to finalise your tax position.

At the end of the tax year, you’ll complete a final declaration, where you:

• confirm your total income 
• make any accounting or tax adjustments 
• include other income sources 

For those within MTD from April 2026, the deadline for this final declaration will be 31 January 2028.

Don’t forget your 2025-26 tax return

You’ll still need to submit a Self Assessment tax return for the 2025-26 tax year, due by 31 January 2027.

This means there’s a transition period where both systems apply:

• 2025-26 – traditional Self Assessment 
• 2026-27 – first year of MTD reporting 

What happens if you make a mistake?

Mistakes are inevitable, especially when adapting to a new system. Fortunately, MTD is designed to make corrections straightforward.

Fixing errors in your records

If you spot an issue such as missing income or an incorrect expense, you can correct it within your digital records.

There’s no need to resubmit everything or start again.

Do you need to resubmit a quarterly update?

In most cases, you won’t need to resubmit a quarterly update. Instead you’ll just:

• update your records 
• make sure the correction is reflected in your next quarterly submission 

Because updates are cumulative, corrections flow through automatically the next time you submit.

What it means for your tax

Each time you submit a quarterly update, you’ll typically receive an estimated tax position based on the information provided so far.

This estimate:

• gives you visibility of your likely tax bill 
• helps with budgeting throughout the year 
• may change as you update or correct your records 

It’s important to remember that this is only an estimate – your final tax liability is confirmed after your end-of-year declaration.

Staying on track

The biggest shift with MTD is moving from a once-a-year task to a more regular routine.

To stay on top of things:

• keep your records updated regularly (weekly works well) 
• review your income and expenses often 
• set reminders for quarterly deadlines 

By building these habits early, MTD becomes far less overwhelming and much easier to manage.

Guides for the self-employed

• HMRC penalties for Self Assessment
• Don’t forget these tax dates in 2026
• How much should I save for taxes? An accountant’s guide
• Side hustle tax rules – do I pay tax for online selling?