Making Tax Digital for Income Tax: 10 common myths busted

You might have heard about it in the news, you might have spoken to a friend, or maybe you even received a letter from HMRC. That’s right, Making Tax Digital (MTD) for Income Tax is coming. 

But just like the legends of Bigfoot or Nessie, the reality of MTD for Income Tax can get warped through many retellings. We’ve come across more than a few modern-day myths but we’re going to bust them right here. Why? Cause bustin’ makes us feel good!

‘It’s been delayed before, it’ll keep getting delayed’

While MTD for Income Tax has been delayed before, HMRC has urged eligible customers to start preparing, as there is less than a year to go before MTD for Income Tax launches. 

The previous delay to the introduction of MTD for Income Tax was announced in December 2022. This pushed back the launch from April 2024 to April 2026. However, momentum has built since then, with Chancellor Rachel Reeves confirming in the 2024 Autumn Budget that MTD for Income Tax will apply to self-employed individuals and landlords with qualifying incomes over £50,000 from April 2026. Those with qualifying incomes over £30,000 will be affected from April 2027, and those with qualifying incomes over £20,000 from April 2028.

A pilot is already underway in 2025/26 with some volunteers testing submissions to HMRC - including one submission using FreeAgent, which was made from space!

‘I will need to submit four or five tax returns a year’

Not exactly - you will have five submissions to HMRC each year. The four quarterly updates aren’t nearly as detailed as a Self Assessment return and should be much faster to file. 

Each quarterly update will summarise your business income and expenses - which, if you use accounting software year-round, will already be auto-populated in the correct forms. Using FreeAgent, you’ll be able to check the figures and submit them straight to HMRC. 

The deadlines for submitting quarterly updates will be the same for everyone who has to follow the MTD for Income Tax rules. From the start of the tax year on 6th April, these deadlines are:  

• 7th August  

• 7th November  

• 7th February  

• 7th May

Your final declaration will look more like what you’re used to with Self Assessment - except all your income and expenses will have already been submitted. This final annual step is where you can add information about personal income or reliefs, make any corrections and then submit for the year. The deadline will be 31st January.

‘I’ll have to pay tax four times a year’

Thankfully: false. As with Self Assessment, you will continue to receive one annual bill and the payment dates for tax will not change.

‘Digital record-keeping will slow my business down compared to spreadsheets’

If you’ve never tried accounting software before, it can seem daunting to shift your ways of working. Like anything new, accounting software can take a little more time at first, as you familiarise yourself with new layouts and processes.

However, after those first couple of weeks, you’ll start to see time savings. In fact, digital record-keeping can actually speed up your financial admin, reducing your manual data entry. 

Using an accounting software (cough, cough - like FreeAgent), you’ll be able to automate lots of your daily admin, including: 

• connecting your bank account to pull bank transactions into your accounting software (which will automatically suggest suitable categories for different types of transactions)
• capturing information from receipts and bills (Smart Capture in FreeAgent scans a photo or PDF receipt and pulls relevant data from it, helping you track your expenses)
• adding recurring expenses (set up expenses to auto-add to your account every month if you have recurring costs)
• creating detailed reports to help you understand your cashflow, profit and loss, best (and worst) paying customers and more

“You want it to be very easy,” says Lyndsey Hogg, owner of independent deli Harris & Co. “You want it to be really user-friendly. And you want it to be efficient. FreeAgent does all that. It’s doing the work for you.” 

‘A digital system is too technical and hard to learn’

‘Digital record-keeping’ certainly sounds complicated - but in reality, it doesn’t mean much more than storing your financial records online. Millions of businesses already manage tax online using accounting software and 97% of Self Assessment tax returns were filed online in 2024. With a little support at the start, you’ll be able to learn the basics quickly. 

“Our Getting Started webinar is the perfect place to begin. We can help you find your way around your FreeAgent account and introduce you to some key features - all in 30 minutes,” says Kirsty, part of our award-winning support team. If you need more help, Kirsty and the rest of our UK-based support team are ready to talk to you by phone, chat or email.  

HMRC also provides advice and support on Making Tax Digital, helping you to navigate the changes. 

‘I can export my spreadsheet and submit that’ 

You will only be able to continue to use spreadsheets if you also use “bridging software”. This tool connects to your spreadsheet (or MTD-incompatible software) to create a digital record and makes submissions from the bridging software to HMRC. 

Note: On its own, bridging software does not fulfil all the requirements of MTD, such as digital record keeping and maintaining digital links between data. This might create additional work for you or your accountant, including:

• having to perform further calculations to get spreadsheet data into the format required by the bridging software
• limiting the changes you can make to your spreadsheet after you have submitted a quarterly update (according to HMRC, you must not “copy information by writing it out in another cell or in other software” or “use ‘cut and paste’ or ‘copy and paste’ to move records”) 

‘HMRC will provide me with free software for MTD for Income Tax’.

Sorry, nope. Unlike Self Assessment, which you could file through HMRC’s own solution on gov.uk, HMRC does not provide software for Making Tax Digital. MTD-compatible software is only available from dedicated third-party providers such as FreeAgent.

‘MTD will replace accountants’  

Just like MTD for VAT before it, MTD for Income Tax will not replace accountants. As with Self Assessment, some people might find they can go it alone, but others - particularly with more complex needs - will still want the reassurance of working with an accountant. Accounting software can help you collaborate with your accountant in real-time, speeding up your processes and reducing mistakes.

If you’re planning to use FreeAgent for MTD for Income Tax and want some extra help staying compliant, you can find an accountant.

‘I will have to pay more to stay compliant with MTD for Income Tax’ 

While most of the solutions for MTD do have a monthly or annual cost, there is a way to get MTD-compatible software for free. 

If you have a business current account with NatWest, Royal Bank of Scotland or Ulster Bank, or make at least one transaction a month through a Mettle bank account, you can get FreeAgent for free. Optional add-ons may be chargeable.

Many of our customers also find that the time saved through FreeAgent means the software pays for itself. “I’m two months into using FreeAgent,” sole trader Steve Moss writes on Trustpilot, “it saves me a lot of time and costs keeping my accounts in order.”

‘Switching to digital record-keeping will be incredibly stressful’ 

Switching doesn’t have to be stressful - for some of our customers, the worry before they switched was worse than anything that came after. 

“I was pleasantly surprised at how easy it was,” says Michael Sheppard, Director at Digital Consulting Solutions. “If I’d have known, I wouldn’t have waited 18 months to switch.” 

Find out more about how you can prepare yourself for MTD for Income Tax, and, if you’re not already using FreeAgent, try out our MTD-compatible accounting software for 30 days free.