Who Says UK Taxes Are High? See How to Pay Just 9% Tax Below!
June 11, 2025How to Calculate VAT Rolling 12-Month Turnover
June 14, 2025Making Tax Digital (MTD) for Income Tax: A Simple Guide for Sole Traders and Landlords
With Making Tax Digital (MTD) set to transform how tax is reported in the UK, many sole traders and landlords are wondering what it means for them. Here’s a clear and concise guide answering the most frequently asked questions.
Do I need to file four tax returns a year under MTD?
No – but you will need to send quarterly updates.
Under MTD for Income Tax, instead of submitting four full tax returns, you’ll send quarterly updates summarising your income and expenses. These are created and submitted through MTD-compatible software.
At the end of the tax year, you’ll complete a final declaration (like the current Self Assessment return), which includes all your updates plus any final tax or accounting adjustments.
What are quarterly updates?
Quarterly updates are simple summaries of your business income and expenses, generated by your software from your digital records. You don’t need to make any tax calculations or adjustments—just submit the totals as they are.
When are quarterly updates due?
You must submit four updates per income stream (e.g. one for self-employment and one for property, if applicable). Each is due by the 7th of the month following the end of the quarter:
- Q1: 6 Apr – 5 Jul → due 7 Aug
- Q2: 6 Jul – 5 Oct → due 7 Nov
- Q3: 6 Oct – 5 Jan → due 7 Feb
- Q4: 6 Jan – 5 Apr → due 7 May
Will I need to make quarterly tax payments?
No.
The tax payment system remains the same. You’ll still pay via payments on account and a balancing payment after the tax year ends. However, your software may offer real-time tax estimates to help you manage your finances throughout the year.
Do I need to keep extra records – and is this costly?
You won’t need more records than usual, but they must now be digital and stored using MTD-compatible software. The summaries you send to HMRC won’t include individual transactions—just category totals.
Cost? There’s a wide range of software options, including free tools for those with simple needs. Choose one that fits your budget and workflow.
What is MTD-compatible software?
This is software approved to work with HMRC’s MTD system. It must allow you to:
- Keep digital records
- Submit quarterly updates
- File your annual return
- Communicate with HMRC
You can use a single all-in-one package or multiple products that work together.
What if I earn under £50,000?
If your combined self-employment and property income is over £30,000, MTD for Income Tax will apply to you from 6 April 2027.
If you earn less than £20,000, you won’t be required to use MTD—but you can opt in voluntarily and enjoy the benefits of digital tax management.
In Summary: What You’ll Need to Do
✔ Keep digital records
✔ Use MTD-compatible software
✔ Submit 4 quarterly updates per income stream
✔ File a final declaration by 31 January
✔ Continue paying tax in the usual way
Need Help Preparing for MTD?
We can help you choose the right software, stay compliant, and make this transition stress-free. Get in touch today!
