Making Tax Digital - overview
Official notes and guidance on the MTD scheme from HRMC
gov.uk
Making Tax Digital (MTD) is a UK government initiative to digitize tax reporting, requiring businesses and individuals to use software to submit tax returns online, and keep business records digitally.
Currently, most businesses and individuals already submit their tax returns online, using software that is compliant with Making Tax Digital - however, some businesses are still using paper tax returns and accounting.
HMRC is phasing out the use of paper tax returns, and will be requiring businesses to keep digital records of your income and expenses.
Since April 2019, businesses and individuals have been required to submit their VAT returns quarterly using MTD-compliant software.
From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) will apply to sole trade businesses and landlords with a total business or property income above £50,000 per year.
Sole traders and landlords earning above £30,000 will follow in April 2027. There are some exemptions for businesses with low trading profits, charities, and businesses with a turnover below £30,000.
If you’re just starting out as a freelancer, it makes sense to start using an MTD-compliant software package from the start, as this will make your life easier when it comes to submitting your tax returns.
Most of the major online accounting platforms are compliant with Making Tax Digital, including Xero, FreeAgent, Quickbooks, and Sage, as well as some banks providing online accounting packages, like Anna.