Making Tax Digital (MTD) is one of the biggest changes to the UK tax system in a generation and if you’re self-employed in London or anywhere in the UK, it’s something you’ll need to understand sooner rather than later.
Whether you’re a London freelancer, sole trader, contractor, consultant, or property landlord, MTD will change how you report tax, even though how much tax you pay largely stays the same.
This guide explains MTD for self-employed people in the UK, in plain English, without HMRC jargon, so you know exactly:
- Who MTD applies to
- When it starts
- What’s actually changing
- How to prepare calmly and confidently
What Is MTD for Self-Employed People in the UK?
Making Tax Digital (MTD) is a UK government initiative designed to modernise the tax system by moving it fully online.
Under MTD for Income Tax, self-employed individuals and landlords will no longer rely on one annual Self Assessment tax return submitted through the HMRC portal or paper forms.
Instead, you will:
- Keep digital records of your income and expenses
- Send quarterly updates to HM Revenue & Customs using approved software
- Submit a final declaration after the tax year ends
This applies across England, Scotland, Wales, and Northern Ireland, including London, where a large proportion of freelancers and contractors operate.
Is MTD Replacing Self Assessment in the UK?
This is one of the most common questions from UK sole traders.
Self Assessment is not disappearing, but the way you submit it is changing.
Under MTD for self-employed people in the UK:
- You will no longer submit a single annual return via the HMRC website
- Instead, you’ll submit:
- Four quarterly income updates
- One final declaration after the tax year
The final declaration replaces the traditional Self Assessment submission, but tax payment deadlines remain broadly the same.
Who Does MTD Apply To in London and the UK?
MTD applies based on your gross income (turnover), not profit.
HMRC looks at your combined income from:
- Self-employment
- UK property rental income
This is especially relevant in London, where many individuals have:
- Freelance income plus rental income
- Multiple small income streams
MTD income thresholds (UK-wide)
You must comply with MTD for Income Tax if your qualifying income exceeds:
- £50,000 → from 6 April 2026
- £30,000 → from 6 April 2027
- £20,000 → from 6 April 2028
If your income is below £20,000, MTD does not currently apply — although voluntary participation may be available.
What Counts as Qualifying Income?
Qualifying income includes UK-based income such as:
- Sole trader or freelance turnover
- Contractor income
- UK rental income
It does not include:
- PAYE salary
- Dividends
- Pension income
This distinction is important for London professionals with mixed income sources.
What’s Changing Under MTD for Self-Employed People?
Here’s a UK-specific comparison.
Before MTD (Traditional UK Self Assessment)
- One tax return per year
- Paper records or spreadsheets allowed
- Manual input via HMRC portal
- Limited real-time tax visibility
Under MTD for Self-Employed (UK)
- Four quarterly updates per tax year
- Digital records required
- Submissions via MTD-recognised software
- Automated calculations reduce errors
- Ongoing view of income and estimated tax
The data reported is largely the same it’s just submitted digitally and more frequently.
Quarterly Updates Explained (UK Deadlines)
Quarterly updates summarise income and expenses, they are not full tax returns.
UK quarterly submission deadlines
- 6 April – 5 July → due by 7 August
- 6 July – 5 October → due by 7 November
- 6 October – 5 January → due by 7 February
- 6 January – 5 April → due by 7 May
You may also elect to use calendar quarters, which many UK businesses find easier to manage.
Do You Pay Tax Quarterly Under MTD?
No.
This is a common misconception among UK sole traders.
MTD does not change when you pay tax.
You still pay:
- Any balancing tax by 31 January
- Payments on account (if applicable) by 31 January and 31 July
Quarterly updates are for reporting only.
What Software Do You Need for MTD in the UK?
HMRC does not provide free accounting software.
To comply with MTD, UK self-employed people must use:
- MTD-compatible accounting software, or
- Bridging software linked to spreadsheets
The software must be able to:
- Maintain digital records
- Submit quarterly updates
- Submit the final declaration
Choosing the right software early is especially helpful for busy London freelancers and contractors.
Are There MTD Exemptions in the UK?
Yes, but exemptions are limited.
Digitally excluded exemption
You may be exempt if it is not reasonably practical for you to use digital tools due to:
- Age
- Disability
- Location
- Religious beliefs
You must apply to HMRC for approval.
Income exemption
If your qualifying income is below £20,000, MTD does not currently apply.
Penalties Under MTD (UK Rules)
MTD introduces a points-based penalty system across the UK.
Key points:
- Missing submissions leads to penalty points
- Financial penalties apply once a threshold is reached
- Points reset after a period of compliance
For those joining MTD in April 2026, HMRC has confirmed a soft-landing period, with no late submission penalties for missed quarterly updates initially.
Why MTD Can Benefit Self-Employed People in London
Many London-based self-employed professionals find that once they switch to digital systems, they gain:
- Better cash-flow planning
- Fewer year-end tax surprises
- Real-time financial insight
- Reduced admin over time
- Lower risk of HMRC penalties
For people juggling multiple clients, contracts, or properties, MTD can actually simplify things.
How to Prepare for MTD in the UK (Step by Step)
- Confirm your MTD start date: Review your UK qualifying income.
- Move to digital record-keeping: Even before MTD becomes mandatory.
- Choose MTD-compatible software: Pick something suited to sole traders or landlords.
- Get comfortable with quarterly updates: They’re simpler than annual returns once set up.
- Get professional support if needed: Many UK accountants manage the process end-to-end.
Do You Need an Accountant for MTD in London?
Not legally, but many London self-employed people choose to have one.
An accountant can:
- Register you for MTD
- Set up compliant software
- Submit quarterly updates
- Complete the final declaration
- Keep you informed of your UK tax position
This is particularly valuable for:
- Freelancers
- Contractors
- Property landlords
- Professionals with mixed income
FAQs related to MTD for Self-employed
Does MTD apply to partnerships?
General partnerships will join later. LLPs and companies follow different rules.
Can I still use spreadsheets?
Yes, but only with HMRC-approved bridging software.
Can my accountant submit everything for me?
Yes, with your authorisation.
Next Steps: Getting MTD-Ready in London & the UK
MTD for self-employed people doesn’t have to be stressful.
With the right information, tools, and support, it becomes a clearer, more organised way to manage your UK tax affairs.
If you’d like:
- Clarity on whether MTD applies to you
- Help choosing the right setup
- Confidence you’re HMRC-compliant
👉 Book a short, no-obligation discovery call
No pressure, just clarity.
Final Thought
MTD is not about catching people out.
It’s about bringing the UK tax system into the digital age.
The earlier you understand it, the easier it becomes, especially for self-employed people in London and across the UK.
