The UK’s tax system is undergoing a major digital transformation, and freelancers and self-employed workers must prepare for significant changes. HM Revenue & Customs (HMRC) is rolling out its Making Tax Digital (MTD) initiative, which will require millions to submit tax returns digitally on a quarterly basis.
What is Making Tax Digital?
MTD is a government scheme designed to modernise the tax system by moving reporting online. Initially targeting VAT-registered businesses, it is now expanding to include self-employed individuals and landlords with annual incomes above £50,000 from April 2026, and those earning over £30,000 from April 2027.
How Will It Affect Freelancers?
Under the new rules, freelancers and self-employed workers will need to:
- Keep digital records of income and expenses
- Use HMRC-approved accounting software
- Submit quarterly tax updates
- File a final end-of-year declaration
This shift aims to reduce errors and improve efficiency but may pose challenges for those accustomed to traditional paper-based methods.
Preparing for the Change
Experts advise freelancers to:
- Switch to digital accounting tools early
- Ensure all financial records are accurately maintained
- Familiarise themselves with MTD-compatible software
- Seek professional advice if unsure about compliance
HMRC has stated that penalties for non-compliance will be introduced gradually, with a focus on education rather than punishment in the initial phase.
Industry Reaction
While some welcome the move towards a more streamlined system, critics argue that the additional administrative burden could disproportionately affect small businesses and sole traders already struggling with rising costs.
The government maintains that digital tax reporting will ultimately save time and reduce errors, benefiting both taxpayers and HMRC in the long run.
