HMRC has signed me up for MTD - what do I do now?

In the next few months, thousands of sole traders and landlords will receive notification from HMRC that HMRC has signed them up for Making Tax Digital (MTD) for Income Tax. If that’s you, we’re here to guide you through your next steps. Follow this guide to make the transition from traditional Self Assessment to this new way of doing your taxes as simple as possible - whether you’ve already signed up for accounting software or not.

A quick recap: what is MTD for Income Tax? 

MTD for Income Tax is a new way for self-employed business owners and landlords to keep their records and report their earnings to HMRC. For most self-employed individuals and landlords, MTD for Income Tax will replace your annual Self Assessment. Instead, you will have to:

• keep records of your business income and expenses in a digital format 
• send quarterly updates of your business income and expenses to HMRC for each income stream (i.e. each self-employed business or total property income) 
• finalise your income annually by submitting an end-of-year update for each income stream and a final declaration covering all your income

Why have I been signed up for MTD? 

MTD for Income Tax became mandatory for most sole traders and landlords with a qualifying income of over £50,000 (based on figures from your 2024/25 tax return) from April 2026. Until now, HMRC has been relying on affected taxpayers to proactively sign up for MTD. By the end of this year, they plan to automatically sign up everyone else they believe should be using MTD as part of this first wave.

Can I get an exemption?

Exemptions from MTD for Income Tax are very limited - you may potentially be exempt if by reason of age or disability you are unable to operate a computer and send the information to HMRC. Or you may be exempt if you are a member of a religious society that means you can’t use computers, or live in a rural area and your internet just simply is not strong enough to submit the updates to HMRC reliably. 

If you’ve already been signed up, but think you should not have been - you will need to apply for an exemption and get that approved in order to continue using traditional Self Assessment. For more information on exemptions, see HMRC’s guidance.

If you work with an accountant or bookkeeper, speak to them about whether you may be exempt.

What do I need to do next?

The very first thing you need to do, if you haven’t already, is get MTD-compatible accounting software. FreeAgent’s easy-to-use software is ready to help you get MTD for Income Tax done - and you can even get it for free with a business bank account from NatWest, Royal Bank of Scotland, Ulster Bank or Mettle. (FreeAgent is free while you retain a business bank account with NatWest, Royal Bank of Scotland or Ulster Bank, or make at least one transaction a month through a Mettle bank account. Optional add-ons may be chargeable.)

If you work with an accountant or bookkeeper, speak to them about your accounting software requirements and they can help set things up for you. FreeAgent is set up so you can collaborate easily (and at no extra charge) with your accountant or bookkeeper. If you’re looking for a FreeAgent-ready accountant, check out our directory. 

You should also log in to HMRC’s online service and double-check all your details are correct. If you have not previously used the online service, that page will take you through signing up for a new HMRC online account.

I’ve got FreeAgent, now what? 

1. Get FreeAgent set up so we can do (most of) the hard work for you  

If you follow these three steps, FreeAgent will do the vast majority of the work for you to allow you to submit your quarterly updates with ease. 

• If you’re new to FreeAgent, put in your opening bank balance. (Here’s how.)
• Set up your bank feed, so your transactions from your business bank account start flowing into FreeAgent. (More information here.)
• Explain your bank transactions as they come in. (It’s easy.)

If you don’t issue invoices, pay bills on credit, or pay any business costs out of your personal funds (i.e. incur any out-of-pocket expenses), this may be all the admin you need to do at this stage.

If you’re already doing these things in FreeAgent, the good news is that you are really well prepared for MTD. “If you’re already using FreeAgent to keep your books accurate, in a timely fashion, you’ll be in a really good place to file your MTD for Income Tax submissions,” says Emily Coltman FCA, FreeAgent’s Chief Accountant. “It’ll just be a case of pushing a few buttons to send your numbers to HMRC.”

There are just a few steps you’ll need to take to make sure everything is shipshape and ready to go.

2. Activate MTD for Income Tax in your software and link to HMRC

Now that HMRC has signed you up for MTD for Income Tax, you will need to link your FreeAgent account to HMRC’s systems. This will show HMRC that you’re fulfilling the requirement of having compatible software and will allow you to submit mandatory tax updates. You can find step-by-step instructions here. 

3. Complete any quarterly updates you have missed

Don’t panic if you have missed the first quarterly update deadline (7th August) or even if you’ve missed the second one (7th November) too. You will not face any fines for being late with quarterly updates in this first year, 2026/27 - but now is the time to get back on track. This guide will tell you what you need to send quarterly updates. And this guide will explain more about how MTD penalties will work when they come in. 

If you started using FreeAgent before April 2026, your quarterly update should be a pretty simple process, as your income and expenses should already be logged in your account. You will just need to double-check the figures and hit send.

You can learn more about how to send quarterly updates by reading this guide or by watching this short webinar.

4. Submit one final Self Assessment by 31st January 2027

While your tax submissions for 2026/27 will be processed through MTD, you must still complete your Self Assessment for 2025/26 if you have not already done so. If you plan to submit online, your filing and payment deadline remains 31 January 2027. After this, you will have completed your final Self Assessment and will have fully shifted to MTD.

5. Continue to fulfil your MTD obligations 

Your quarterly updates will be due on 7th August, 7th November, 7th February and 7th May each year. Your first deadline to submit your MTD for Income Tax end-of-year update and final declaration, and pay your tax for 2026/27, will be 31st January 2028. You can find out more about what the full first year of MTD looks like in our dedicated blog.

What happens if I don’t follow these steps?

The government has delayed introducing fines for MTD for Income Tax until April 2027. This means you won’t get penalty points if you are late filing your quarterly updates in the 2026/27 tax year. However, you will still be required to keep digital records and all your quarterly updates must be submitted before you file your first final declaration. Read more about MTD for Income Tax fines and how to avoid them.