Question 1

Does Making Tax Digital mean I’ll pay more tax?

Accepted Answer

No. Making Tax Digital changes how you keep records and how you send information to HMRC. It does not change the tax rates or the basic rules on what is taxable and what you can claim.

In practice, though, better records can change the result. If you have been under-claiming expenses, missing mileage, or forgetting small costs like software subscriptions, getting things up to date can reduce mistakes and sometimes lowers the tax bill. If your records have been too optimistic, it can also mean you see the true numbers sooner, which is better than a nasty surprise at the end.

Question 2

Is the threshold based on turnover or profit?

Accepted Answer

It’s based on gross income, not profit. In plain terms that means turnover from self-employment and/or gross rental income from property, before you take off expenses, materials, mileage, subcontractors, mortgage interest, or anything else.

Quick example: if a builder invoices £55,000 in the year but spends £25,000 on materials and other costs, their profit is £30,000. For MTD threshold purposes, HMRC look at the £55,000 gross income figure, not the £30,000 profit.

Question 3

Do I have to submit four tax returns a year?

Accepted Answer

No. Under Making Tax Digital you send quarterly updates, but they are not four full tax returns. They are simple summaries of your income and expenses for that period, pulled from your digital records through compatible software.

You still do an end-of-year step to finalise the figures and make any adjustments, then submit the final declaration for the tax year. So think "four updates plus a year-end finalisation", not "four self-assessment returns".

Question 4

Do I need to buy accounting software?

Accepted Answer

For Making Tax Digital, you need MTD-compatible software to send the quarterly updates to HMRC. You cannot just type the figures into your HMRC online account like you might have done before.

That does not always mean buying full accounting software, though. In practice, some people use a spreadsheet for their day-to-day records and then use bridging software to submit the MTD numbers in the right format. What makes sense depends on how many transactions you have and how tidy your records are.

Question 5

I’m a landlord and also self-employed. How does that work?

Accepted Answer

If you are a landlord and also self-employed, you usually look at both income sources together when working out where you sit for Making Tax Digital. In other words, you add your gross self-employment income and your gross rental income for the relevant tax year. Gross means before expenses, so it can feel higher than you expect if you have big costs.

In practice, the details matter. Things like whether the property income is in your own name or a partnership, and which years HMRC uses to test the threshold, can change how it applies. If you are close to the line, it is worth getting advice so you do not overprepare or miss your start date.

Question 6

I’m under the threshold. Can I ignore MTD?

Accepted Answer

If your gross income is under the threshold for your start date, you probably are not in scope yet, so you will not have to do the quarterly updates or use MTD-compatible software straight away. Just keep an eye on it, because it is based on gross income (turnover or rent before expenses), and a good year can push you over without you noticing.

But I would not ignore it completely. Getting your records a bit more digital now, even if it is just a consistent spreadsheet and saving receipts properly, makes the switch much easier later and takes pressure off at tax return time. In practice it means fewer missing costs, less guesswork, and a calmer year end.

Guides

Making Tax Digital 2026 – What It Actually Means for You (in Plain English)

MTD is Coming – Here’s How to Prepare (Step by Step)

7 Things Small Business Owners Get Wrong About Making Tax Digital

How Much Will Making Tax Digital Actually Cost You?

Got a Side Hustle? HMRC Already Knows About It

Own a Rental Property? Here’s What Changes in April 2026

Making Tax Digital – Every Question We Get Asked (Answered Simply)