Making Tax Digital (MTD) for Income Tax is here. If you’re a sole trader or landlord with a turnover of £50,000+, it applies to you. If you’re worrying about accountants’ fees and software costs, we have a solution. There is a way to DIY MTD, without an accountant or software. It does involve opening a business bank account, but that is also free.
What is MTD for Income Tax?
MTD for Income Tax replaces the annual self-assessment tax return with a new system of digital record keeping and quarterly submissions to HMRC. You’ll still need to complete a final end-of-year declaration to wrap things up, but the days of pulling everything together once a year in January are gone. Instead, you keep records digitally throughout the year and submit a summary to HMRC every quarter.
Who does MTD apply to?
MTD for Income Tax currently applies to sole traders, landlords, or anyone who is both, with combined gross income over £50,000. Gross means before expenses, so it’s worth checking your total income figure rather than just your profit.
To get the full lowdown on who it applies to and what the deadlines are, read our beginner’s guide to Making Tax Digital for sole traders and landlords. This article focuses on the practical steps you can take to DIY the set up and ongoing quarterly digital submissions.
Step 1: Get your details together
You’ll need your Government Gateway user ID and password, your Unique Taxpayer Reference (UTR), and your National Insurance number. If you’ve filed a Self Assessment tax return before, you already have all of these. Lost your login? You can recover your Government Gateway details and UTR via gov.uk.
Step 2: Choose your MTD-compatible software
You can’t submit quarterly updates directly through HMRC’s website, you need software that connects to their system. It’s worth getting this set up before you complete your sign-up. More on the free option below.
Step 3: Sign up via your Government Gateway account
Log in at gov.uk and follow the steps to register for MTD for Income Tax. Once you’ve signed up, your annual self-assessment tax return is replaced by quarterly updates throughout the year, plus a final end-of-year declaration to confirm everything is complete.
Step 4: Authorise your software to connect to HMRC
Inside your software, you’ll be prompted to authorise the connection to HMRC. It’s a one-time step and only takes a few minutes. After that, you’re set up and ready to submit.
The free DIY option: Mettle and FreeAgent
Discover how to become MTD compliant without spending a penny.
1. Open a Mettle business bank account
Mettle is a free business current account, run entirely through an app. It’s built for self-employed people and small businesses, and straightforward to set up. You can get started at mettle.co.uk.
2. Unlock free access to FreeAgent
Mettle account holders get free access to FreeAgent. It’s one of the most widely used MTD-compatible accounting platforms in the UK, and the one Maslins uses for all our clients. FreeAgent normally comes at a cost, but it’s included free with your Mettle account.
3. Connect FreeAgent to HMRC
Inside FreeAgent, authorise the connection to HMRC. From here, submitting your quarterly updates is built into the workflow. FreeAgent will prompt you when a deadline is approaching and walk you through the submission.
Is DIY right for you?
This route works well if your finances are relatively straightforward. If you have multiple income sources, property, or anything else that complicates the picture, it’s worth getting advice before you set everything up. Getting it wrong can mean penalties, and mistakes are always more time-consuming to unpick than to avoid.
Prefer someone else to handle it?
If you’d rather hand it over, we have a sole trader MTD package and landlord MTD package. These both cover digital records, quarterly submissions, and your end-of-year declaration.
Get in touch with the team to talk MTD.
