MTD for freelancers: what you actually need to do (step by step)

Ok, being honest here, the number one question we get asked is basically:

“What the actual f*** do I need to do for MTD?”

Not the theory. Not the legislation. Just:

• what do I need to do

• when do I need to do it

• and how do I stop tax becoming a horrible January surprise

This guide answers that. In plain English. Step by step.

First, very briefly: what MTD actually means

Under Making Tax Digital for Income Tax, most self‑employed people will eventually need to:

• keep digital records of income and expenses

• send quarterly updates to HMRC

• submit a final year‑end declaration

Important reassurance:

• ❌ this does not mean four tax bills a year

• ❌ this does not mean everything has to be perfect

It means four check‑ins, using roughly up‑to‑date figures.

Think of it as moving from:

“Everything, once a year, in a panic”

to:

“A small, boring tidy‑up every three months.”

The simple system (this is the whole thing)

If you want the short version, here it is:

1. Pick one place to record income and expenses

2. Keep it vaguely up to date

3. Once a quarter, check it and submit the update if required

4. Put 30–40% aside for tax as you go

5. Do a final tidy‑up at the end of the year

That’s it. No hidden steps.

Everything below just explains how to do that without losing your mind.

Step 1: choose one place to keep records

You need one system for tracking:

• money coming in

• business costs going out

This could be:

• a simple spreadsheet, or

• accounting software that pulls things together for you

There is no “best” option; the right one is the one you’ll actually use.

The biggest mistake is using too many places (bank statements, notes, emails, vibes) and trying to sort it all out later.

Step 2: keep it roughly up to date

You do not need to log things daily.

Weekly or monthly is fine.

Your job is simply to:

• record income when it lands

• record expenses as they happen

• keep business and personal spending separate

If it’s roughly right, it’s right enough.

Step 3: think in quarters, not years

From 2026 onwards, freelancers need to think in quarters.

Each quarter has one simple purpose:

• check your numbers

• send the update if required

• move on with your life

Quarter 1 (April – June)

Set‑up and habit building

• make sure income and expenses are being recorded

• don’t aim for perfect, aim for consistent

• start setting money aside for tax

Quarter 2 (July – September)

First proper check‑in

• review totals so far (rough is fine)

• submit the quarterly update if required

• check your tax savings pot is building

This is also when many freelancers have a 31 July payment on account, so having money set aside already is a huge stress‑reducer.

Quarter 3 (October – December)

Reality check before year end

• look at year‑to‑date income and expenses

• check if anything big is coming up

• submit the next quarterly update

This is the moment to fix problems before January.

Quarter 4 (January – March)

Close the year calmly

• make sure everything is recorded

• submit the final quarterly update

• prepare for the year‑end declaration

If you’ve kept up during the year, this should feel boring and boring is good.

Step 4: run a tax savings pot (this is non‑negotiable)

If you only take one thing from this article, make it this.

Keep it separate

Your tax money should not live in your main spending account.

Options include:

• a seperate saving space within your bank account

• a second account used only for tax

If it’s easy to spend, it’s too close.

Choose a sensible percentage

Many freelancers aim for:

• 30% if income is modest and expenses are high

• 40% if income is higher or unpredictable

It doesn’t have to be perfect; it just needs to be cautious.

A quick word on reminders and systems

Most people don’t struggle with MTD because it’s complicated.

They struggle because:

• life gets busy

• they forget

• January sneaks up on them

Anything that:

• keeps records tidy in one place, and

• nudges you when a quarter ends

is doing a lot of heavy lifting for you.

Some people are happy doing this manually. Others prefer systems that quietly keep things organised in the background.

There’s no right answer, just what works for you.