MTD Myths Explained: 5 Things MTD Doesn't Actually Require

MTD Is Confusing Enough Without the Myths

Making Tax Digital for Income Tax (MTD for ITSA) has been talked about for years, delayed twice, and written about endlessly online. That long run-up has given plenty of time for misconceptions to take root. Some of those misconceptions are stopping real people - sole traders, freelancers, and landlords - from getting started, because they believe MTD requires something it simply does not. This post tackles five of the most common ones, head on, so you can see what MTD actually requires and realise it is probably less complicated than you feared.

Myth 1: You Need Fancy Accounting Software

This is probably the most widespread MTD misconception of all. People hear "Making Tax Digital" and assume they need to sign up for a complicated accounting platform, learn a new system, and pay a monthly subscription for tools they will never fully use.

That is not what HMRC requires.

What MTD actually requires is that your records are kept digitally and that you submit your quarterly updates to HMRC using HMRC-recognised software. That is it. The software does not need to produce invoices, run payroll, manage stock, or connect to your bank automatically. It just needs to let you record your income and expenses and send the totals to HMRC.

This is exactly what bridging software does. Bridging software sits between your existing records (whether that is a spreadsheet or a simple list) and HMRC's systems, and handles the submission for you. It is designed for people who do not need a full accounting platform - which is most sole traders and landlords.

If you want to understand how bridging software works and whether it is right for your situation, our plain-English explainer covers exactly that.

Myth 2: You Need to Do Double-Entry Bookkeeping

Double-entry bookkeeping is the traditional accounting method where every transaction is recorded twice - once as a debit and once as a credit. It is the foundation of professional accounting and is genuinely useful for businesses with complex finances.

It is not something MTD requires from sole traders or landlords.

What MTD requires is that you record your income and allowable expenses accurately, in digital form, and report the totals each quarter. There is no requirement to use debits and credits, no requirement to produce a balance sheet, and no requirement to understand the mechanics of double-entry accounting at all.

For most people filing MTD, the record-keeping structure is straightforward:

• Record money coming in (income)
• Record money going out on allowable business costs (expenses)
• Keep the supporting evidence (receipts, invoices, bank statements)
• Report the totals quarterly

That is a much simpler task than double-entry bookkeeping. If you are a sole trader or landlord managing your own records, you are not expected to think like an accountant. You are expected to keep honest, accurate records - and that does not require learning a specialism.

If you are unsure what counts as an allowable expense in the first place, our guide to allowable expenses for sole traders and landlords is a useful starting point.

Myth 3: You Have to Abandon Your Spreadsheets

This one causes a lot of unnecessary worry. Many sole traders and landlords have been keeping records in spreadsheets for years. They work, they are familiar, and the idea of being forced to switch to something new feels disruptive.

The good news is that MTD does not ban spreadsheets.

What it does require is that you cannot submit directly from a spreadsheet the way you previously could with the older online tax return service. You need HMRC-recognised software to handle the actual submission. But that does not mean throwing away your spreadsheet. It means your spreadsheet feeds into (or sits alongside) a bridging tool that handles the HMRC connection.

In practice, many people continue to use their existing spreadsheet for tracking income and expenses, then import or enter those totals into bridging software when it is time to submit a quarterly update. The spreadsheet stays. The only thing that changes is how the data reaches HMRC.

AffordableMTD, for example, supports CSV import so you can bring your spreadsheet data across without retyping everything. If that process sounds useful, our guide to CSV import and AI categorisation walks through how it works in practice.

Myth 4: MTD Will Replace Your Accountant (Or Make You Need One)

This myth cuts both ways. Some people worry MTD will make accountants redundant. Others worry MTD is so complicated they will now need an accountant for the first time. Neither is quite right.

If you currently use an accountant

MTD changes the frequency of filing - you will now submit four quarterly updates per year plus a final declaration, rather than one annual tax return. Your accountant may adjust how they work with you to accommodate that rhythm. But MTD does not eliminate the need for professional advice if you find it useful, particularly if your finances are complex, you have multiple income sources, or you want someone else to handle submissions on your behalf.

For accountants working with clients who have mixed income types, there is a separate guide covering the practical considerations.

If you currently file yourself

MTD is designed to be manageable without an accountant. The quarterly updates are not full tax returns - they are summaries of income and expenses for that quarter. If you have been completing your own tax return for years, the quarterly updates are less detailed, not more. The final declaration at the end of the year is where you make any adjustments and confirm your overall tax position, but that follows the same basic logic as a tax return.

Most sole traders and landlords with straightforward finances - one business, one property, no unusual allowances - can handle MTD themselves using affordable bridging software. The process is not trivial, but it is not beyond someone who has been managing their own records for years.

If you want a clear comparison of what quarterly updates involve versus the full tax return, this post explains the difference.

Myth 5: MTD Is Only for Big Businesses

The origins of Making Tax Digital do lie partly in VAT, where larger businesses were brought in first. That history has left some people with the impression that MTD for Income Tax is also aimed at large, complex businesses rather than individuals.

In reality, the current MTD for Income Tax rules apply to sole traders and landlords whose gross income from self-employment and property combined exceeds £50,000 per year. From April 2027, that threshold drops to £30,000. A lower threshold of £20,000 has been announced as a government intention, though this has not yet been legislated.

These thresholds bring in a large number of relatively small, self-managed businesses and individual landlords - many of whom have never used accounting software in their lives, file their own tax returns, and run their finances from a bank account and a spreadsheet. MTD is built with those people in scope. The software options available, including bridging software, reflect that reality.

If you are unsure whether you fall within the threshold, our MTD eligibility checker explains who needs to file and when. And if you have both self-employment and property income, this post covers how the two income types interact for threshold purposes.

What about sole traders with multiple businesses?

If you have more than one self-employment - for example, you work as a freelance photographer and also do some tutoring - both income streams count toward your threshold. The rules around multiple self-employment businesses and the MTD threshold are explained here.

So What Does MTD Actually Require?

To cut through the noise, here is what MTD for Income Tax actually requires from sole traders and landlords:

1. Keep digital records of your income and allowable expenses throughout the year. A spreadsheet or simple records in recognised software both work, as long as the records are digital and accurate.
2. Submit four quarterly updates to HMRC each year, covering the income and expenses for each quarter. These are not full tax returns - they are summaries.
3. Submit a final declaration at the end of the tax year, confirming your overall income, claiming any adjustments or allowances, and completing your tax position for the year.
4. Use HMRC-recognised software to submit. This can be bridging software, a full accounting platform, or anything else on HMRC's approved list. The choice is yours.

There is no requirement for double-entry bookkeeping, no requirement to abandon spreadsheets, no requirement to hire an accountant, and no requirement for expensive software you do not need.

If you want to understand what to include in each quarterly update at a practical level, this post covers the bare essentials of what goes in each section. And if you are at the very beginning and want to understand how MTD works overall, the plain-English explanation of MTD for Income Tax is the right place to start.

One More Thing Worth Knowing

MTD does require some adjustment to how you work. Quarterly reporting means you cannot leave everything until January the way many people did under the old annual tax return system. That rhythm takes a little getting used to.

But that adjustment is about timing and habit, not complexity. If you record income and expenses as you go - or catch up monthly rather than annually - the quarterly update is not much work at all. The biggest shift is doing things little and often rather than all at once.

For a practical guide to setting up your bookkeeping system so quarterly updates feel manageable, this post on setting up your MTD bookkeeping system is worth reading alongside this one.

Summary

MTD for Income Tax does not require fancy accounting software, double-entry bookkeeping, or giving up your spreadsheets. It does not make accountants redundant, and it is not aimed only at large businesses - it applies to sole traders and landlords above the income threshold, many of whom file everything themselves. What it requires is digital records, quarterly updates, and HMRC-recognised software to handle the submission. For most people, that is simpler and more affordable than the myths suggest.