Making Tax Digital for Self-Employed People
Quarterly digital reporting is coming for all self-employed people. Here is what you need to know and how to prepare.
What Is Making Tax Digital?
Making Tax Digital (MTD) is HMRC's programme to modernise the UK tax system. Instead of filing one annual Self Assessment return, self-employed individuals and landlords will need to keep digital records and submit quarterly updates to HMRC using compatible software throughout the year.
The goal is to reduce errors, give taxpayers a clearer picture of their tax position in real time, and ultimately make tax administration more efficient. For self-employed people, this means moving away from annual paper-based returns to regular digital reporting.
Digital Records
All income and expenses must be recorded digitally, not on paper
Quarterly Updates
Submit summaries to HMRC every three months
Final Declaration
Annual finalisation replaces the traditional Self Assessment return
Who Does MTD Affect and When?
MTD for Income Tax Self Assessment (MTD ITSA) is being rolled out in phases based on your annual income. Here is the current timeline:
Self-employed individuals and landlords with income over £50,000
Self-employed individuals and landlords with income over £30,000
Self-employed individuals with income below £30,000
Even if you are below the threshold, start now
Digital record-keeping is best practice regardless of whether MTD applies to you yet. When the threshold lowers, you will already be prepared. Plus, keeping digital records year-round makes your annual Self Assessment much easier.
Quarterly Reporting Deadlines
Under MTD, you will submit four quarterly updates and one final declaration each year. The tax year still runs from 6 April to 5 April, split into four quarters:
| Quarter | Period | Submission Deadline |
|---|---|---|
| Q1 | 6 April – 5 July | 5 August |
| Q2 | 6 July – 5 October | 5 November |
| Q3 | 6 October – 5 January | 5 February |
| Q4 | 6 January – 5 April | 5 May |
| Final Declaration | Full tax year | 31 January (following year) |
Each quarterly update is a summary of your income and expenses for that period. It does not require a full tax calculation; that happens in the final declaration.
Penalties for late submission: HMRC will apply a points-based penalty system. Each late submission earns a point. Once you reach the threshold (4 points for quarterly obligations), you will receive a £200 penalty. Points expire after a period of compliance.
What Goes in a Quarterly Update?
Quarterly updates are simpler than you might expect. You are not filing a full tax return four times a year. Each update includes:
Total Income
All business income received during the quarter (cash fares, card payments, platform earnings, tips)
Total Expenses
All allowable business expenses incurred during the quarter, categorised by type
Running Totals
Year-to-date figures so HMRC can estimate your tax position
No Tax Calculation
You do not calculate or pay tax with each quarterly update. Tax is finalised annually.
Software Requirements for MTD
Under MTD, you must use HMRC-recognised compatible software to maintain your digital records and submit quarterly updates. Pen and paper, or even basic spreadsheets, will no longer be accepted as your primary record-keeping method.
Your software must be able to:
Fyled Is Built for MTD
Fyled is designed from the ground up to be MTD-compatible. When you log your income and expenses in Fyled throughout the quarter, we automatically compile your quarterly update and submit it to HMRC via their API. No extra steps, no data re-entry, no stress.
We handle all 14 expense categories, automatic mileage calculations, and real-time tax estimates so you always know where you stand.
Common Questions About MTD
Do I have to pay tax quarterly?
No. Quarterly updates are summaries of income and expenses only. You calculate and pay your tax through the final declaration, due by 31 January following the end of the tax year. However, HMRC may still require payments on account as they do now.
Can I still use an accountant?
Yes. Your accountant can submit quarterly updates on your behalf using their own MTD-compatible software. However, Fyled makes it simple enough that many users choose to manage it themselves.
What if I have multiple income sources?
Each self-employment business needs separate quarterly updates. If you also have rental income, that requires its own updates. Fyled currently handles self-employment income.
Will Self Assessment go away?
The annual Self Assessment return will eventually be replaced by the quarterly update process plus a final declaration. The final declaration serves a similar purpose but draws on the data you have already submitted quarterly.
What if I make a mistake in a quarterly update?
You can amend previous quarterly updates through your software before the final declaration. Quarterly updates are considered provisional and can be corrected.
Do I need to buy new software?
If you are already using Fyled to track your income and expenses, you are covered. Fyled will handle the MTD submission process when it becomes mandatory for your income bracket.
How to Prepare for MTD Now
Even if MTD does not apply to you yet, these steps will save you time and stress when it does:
- 1
Start keeping digital records today
Sign up for Fyled and log your income and expenses digitally. This builds the habit before it becomes mandatory.
- 2
Separate business and personal finances
A dedicated business bank account makes quarterly reporting straightforward.
- 3
Track mileage consistently
Log odometer readings daily. Quarterly updates need accurate mileage figures for each period.
- 4
Review your income threshold
If your gross income is approaching £50,000 or £30,000, you should plan for the relevant MTD start date.
- 5
Set quarterly reminders
Get into the rhythm of reviewing your records every three months, even if you are not yet required to submit.
Get MTD Ready with Fyled
Do not wait until the deadline. Start keeping digital records today and Fyled will handle MTD compliance automatically when it becomes mandatory. Free to get started, built specifically for UK self-employed people.