Making Tax Digital (MTD) for Income Tax 2026: What Quarterly Updates Really Mean for the Self-Employed
As Making Tax Digital (MTD) for Income Tax approaches, many business owners and landlords are becoming increasingly aware that changes are coming. However, there are also a lot of misconceptions about what these changes will actually involve.
Making Tax Digital (MTD) has already been introduced for VAT, meaning VAT-registered businesses have been required to keep digital records and submit information to HMRC through compatible software for some time. The next stage of the initiative extends this approach to income tax, particularly affecting those who are self-employed or receiving rental income.
Despite the concern surrounding the changes, the reality is that the system is not as drastic as many people assume, at least in its current form.
Quarterly Submissions – But Not Quarterly Tax Returns
One of the biggest misconceptions about Making Tax Digital (MTD) for Income Tax is the belief that taxpayers will need to file a full tax return every quarter or pay tax four times a year.
That is not how the system currently works.
Under the new rules, the quarterly submissions are primarily about providing HMRC with information, rather than completing full tax calculations.
Each quarter, affected individuals will simply need to submit basic financial data such as:
- Total turnover for the period
- Total business expenses for the period
These updates are essentially snapshots of business activity rather than full tax returns.
Importantly, this means:
- You do not calculate your final tax liability every quarter
- You do not submit a full self-assessment return every quarter
- You do not pay income tax quarterly under the current system
Self-Assessment Still Determines Your Tax
Even with quarterly updates in place, the core structure of the UK tax system remains the same.
The amount of tax you owe will still be determined through the self-assessment tax return process, and the timing of payments will continue to revolve around payments on account and the existing self-assessment deadlines.
In other words, the quarterly updates provide HMRC with more frequent information, but they do not currently change how or when tax is actually paid.
Why HMRC Is Introducing the System
At its core, Making Tax Digital (MTD) is designed to move the tax system toward more frequent reporting using digital records.
The quarterly updates allow HMRC to gather information about business performance throughout the year rather than receiving everything at the end of the tax year through a single submission.
While this will involve some additional administrative work, the changes are not intended to completely transform the tax payment cycle at this stage.
Could the System Change in the Future?
Although the current system focuses mainly on information reporting, it is possible that Making Tax Digital (MTD) will evolve over time.
Looking ahead, it is not difficult to imagine a future where HMRC moves toward a system where:
- Self-employed individuals report and settle tax more frequently
- Tax payments become more regular throughout the year
- The system begins to resemble Pay As You Earn (PAYE) for those who are not employees
If that were to happen, it could have implications for cash flow, particularly for businesses that are used to managing tax liabilities through the current annual cycle.
For now, however, this type of change has not yet been implemented.
What It Means for Businesses Right Now
At present, Making Tax Digital (MTD) for Income Tax should be viewed as an additional reporting requirement rather than a complete overhaul of the tax system.
The main practical changes involve:
- Keeping digital records
- Submitting quarterly summaries of income and expenses
- Continuing to complete a self-assessment tax return at the end of the year
While it will add an extra layer of administration, the changes are not as intimidating as they may initially sound.
For many self-employed individuals and landlords, the introduction of MTD represents a gradual step toward a more digital tax system rather than an immediate shift to quarterly tax payments. However, as the system develops in the coming years, it is possible that the reporting and payment structure could evolve further.
Whilst you’re here, why not follow our LinkedIn page along with our YouTube page which contains 100’s of useful videos with tax and accounting advice (including overseas income)!
There are also hundreds of useful articles on our own website here.
Book a FREE consultation call with us here
