Making Tax Digital (MTD) for Self-Assessment: A Guide for the Self-Employed and Landlords

charlotte18000
Mar 21
4 min read

What is MTD for Self-Assessment?

Making Tax Digital (MTD) is HMRC’s big push to modernise the tax system, and if you're self-employed or a landlord with an annual turnover over £50,000, it’s coming for you from April 2026! But don’t worry, we’ve got your back.

Instead of the once-a-year panic of filing your Self-Assessment tax return, MTD will require you to keep digital records and send updates quarterly using MTD-compatible software. Think of it as ‘little and often’ rather than ‘all at once in a mad rush’—which might actually be a good thing!

Who Needs to Join MTD for Self-Assessment?

You’ll need to comply if you:

✅ Are self-employed (sole traders) with an annual turnover of £50,000+ (from April 2026)

✅ Are a private landlord with an annual turnover of £50,000+

✅ Have an annual turnover of £30,000+ (but under £50,000) from April 2027

🔹 What’s the difference between turnover and profit? Turnover is the total income you earn before expenses, while profit is what’s left after deducting your business costs. MTD thresholds are based on turnover, not profit, so even if your expenses are high and your profit is low, you may still need to comply.

If your turnover is below £30,000, HMRC says it will review MTD requirements before rolling it out further

How Does MTD Work?

Once MTD applies to you, here’s what you’ll need to do:

Keep digital records of all income and expenses using MTD-compatible software (no more shoeboxes of receipts!)

Submit quarterly updates to HMRC (April, July, October, January) instead of a single tax return

File a final end-of-year declaration (similar to your current tax return) to confirm everything is correct

This means you’ll have a clearer picture of your tax bill throughout the year, rather than a nasty surprise in January!

How to Enrol for MTD for Self-Assessment

Getting enrolled for MTD is straightforward, but it’s important to get everything in place early to avoid stress and penalties. Here’s how you can do it:

Sign up for MTD via HMRC – You’ll need a Government Gateway account and can register on HMRC’s website when MTD for Self-Assessment opens for sign-ups.

Get MTD-compatible software – We highly recommend Xero, as it integrates seamlessly with HMRC and makes digital record-keeping simple.

Start keeping digital records now – Even though MTD isn’t mandatory until 2026, getting used to digital record-keeping early will make the transition stress-free.

Submit your quarterly updates – Once registered, you’ll need to start submitting updates every three months instead of an annual tax return.

We know this can all seem like a lot, but we’re here to help! Let us take the stress away and get you set up now so everything runs smoothly when MTD kicks in.

Example: How MTD Will Change Things for You

Meet Sarah, a self-employed graphic designer. Currently, Sarah keeps her records in a spreadsheet and submits her Self-Assessment in January. Under MTD, she will:

Use Xero to record her income and expenses (our recommended software!)
Submit a quick quarterly update to HMRC every three months
At year-end, check everything and submit a final declaration

No last-minute tax stress, no missing receipts, and a better idea of her tax bill throughout the year!

What Software Do You Need?

To comply with MTD, you’ll need MTD-compatible software. We highly recommend Xero for its ease of use, automation features, and seamless HMRC integration.

Why Xero?

✅ Easy-to-use and cloud-based

✅ Automates bookkeeping tasks

✅ Connects to your bank for real-time tracking

✅ Integrates directly with HMRC for MTD compliance

If you're not already using Xero, we can help get you set up!

What Happens if You Don’t Comply?

HMRC will introduce a points-based penalty system: 🚨 Miss a quarterly update? You’ll get a penalty point. 🚨 Too many points? You’ll get a fine.

So, staying on top of things means avoiding unnecessary penalties.