Are you a freelance copywriter / self-employed copywriter?
Do you earn over £50,000?
If not, you have some breathing space in switching from the traditional annual self-assessment tax return process to the Making Tax Digital (MTD) one.
Otherwise, get ready for having to be uber organised …
What is MTD (Making Tax Digital)?
Making Tax Digital is a UK Government compliance requirement that takes effect this year for some people. A digital system is already in place for VAT but this one, for tax, was meant to start before Covid and is now being gradually phased in depending on how much you earn.
MTD is a different way of reporting and providing your income tax details to help reduce errors and it applies to freelancers and consultants.
What does MTD mean for a freelance copywriter?
A downside of being a freelance copywriter or self-employed creative is that income can be quite up and down – unless, of course, you’re lucky enough to have several clients signed up on a retainer basis.
For HMRC, MTD means a more efficient tax system and fewer errors. For you, it means getting your head around a new way of filing your tax info, keeping up with quarterly tax-filing deadlines and, in general, being super organised.
MTD is intended to help you track your potential tax and VAT throughout the year, so that you stay informed and can avoid the nasty shock of an unexpected end-of-year tax bill.
How does MTD work?
Goodbye having to keep paper records and doing one big self-assessment tax return each year. Hello to keeping digital records and submitting them quarterly.
You’ll need to:
- Use HMRC-compatible software connecting to HMRC’s system to keep a digital track of all your day-to-day income and expenses.
- Send quarterly summaries of these to HMRC from your software (almost like mini interim tax returns).
- Send one final tax declaration at the end of the tax year.
- Pay tax by 31 January (and possibly also by 31 July if you need to make a second payment on account).
What happens at the end of the tax year?
The new system won’t change the way you pay income tax or the dates you need to pay it.
Simply sign in to your online tax account through GOV.UK or on the HMRC app and submit a final declaration to confirm your total taxable income (including any other sources of income e.g., savings interest or employment wages). You can also claim any allowances or reliefs.
When do you need to start Making Tax Digital?
It depends on your gross annual self-employment income.
If the amount of qualifying income on your 2023/24 tax return indicated you might need to comply with MTD starting from April 2026, you should have received a letter from HMRC last year in spring or summer. Didn’t get one? Unfortunately it’s still down to you to check if you need to use Making Tax Digital.
Here are the MTD threshold dates:
- Earning over £50,000? MTD will apply to you as a mandatory requirement by the Government from April 2026.
- Earning £30,000 – £50,000? You’ll start from April 2027.
- Earning less than £20,000? You’ll start from April 2028, but can decide to sign up now anyway.
What MTD software do you need as a freelancer?
To create digital records, send HMRC quarterly updates and submit your tax return using Making Tax Digital for Income Tax, you’ll need HMRC-compatible software.
There’s a choice of these compliant software options on the GOV.UK website: Find software that works with Making Tax Digital for Income Tax
Your bank or software provider may even offer a free version, such as Barclays FreshBooks and Monzo Business
Can you do MTD by yourself?
Don’t want the expense of paying an accountant? Yes, of course you can do it yourself (especially if already using Making Tax Digital for VAT if VAT-registered).
If you don’t already keep digital records of your income and expenses using software like Xero or QuickBooks, it makes sense to start asap and get used to doing things differently.
What happens if I submit my MTD return late?
If you’re the type of freelance creative who likes to keep paper receipts stuffed in a bag somewhere until the very last minute of filing your tax return, then take note: you can face a maximum penalty of up to £3,000 a quarter if you don’t adhere to the following MTD rules:
- Missing a return deadline
- Not keeping digital records
- Not using MTD-compatible software
- Transferring info manually instead of using a digital link
There’s a points-based system if you file records late and late payment fines too.
Missing a quarterly deadline or the final declaration at the end of the tax year equals one penalty point. Once you reach four points, you’ll need to pay HMRC £200 – with even more fines if you keep missing submission deadlines. HMRC can also charge a £300 minimum fine if you withhold any relevant tax info deliberately.
What are the pros and cons of Making Tax Digital?
| Pros | Cons |
| Digital automation means fewer mistakes | Not all MTD software is free |
| Avoids last-minute end-of-tax-year return headaches | Needs a mindset shift if used to paper or manual spreadsheets |
| Clear, real-time picture of finances | Four deadlines to manage plus annual finalisation |
| Time-saving | Requires being organised |
| No need to scan every receipt | No copying, pasting, or manual retyping allowed |
| Keeps you on track with tax owed | Late submissions incur penalties and fines |
Can sole traders opt-out of MTD?
Unless you’re classed as digitally exempt, are elderly or disabled, or live somewhere with very limited Internet access, the answer is no. (Find out How To Apply For An Exemption)
The alternative could be to become a limited company.
Is MTD helpful? Or a complete pain?
On the bright side, MTD is designed to help freelancers and sole traders make tracking and reporting taxable income much easier.
On the down side, you need to stay on the ball all the time. NO MISSING DEADLINES!!! Failure to comply with MTD regulations can result in penalties.
Tbh, there’s no avoiding MTD if you’re freelance. You need to get your head around keeping digital records, making quarterly updates and filing an annual declaration so that it all becomes a regular habit. Love it or hate it.
I’m really organised – the type of person who plans a holiday at least a year ahead – but I really don’t enjoy the accountancy side of freelancing as a copywriter. So when it comes to MTD, then yuck!
I’m happy to let my accountant of over 25 years handle everything for me (plus, accountancy fees can be offset against tax). Having said that, however, he’s advised me to become a limited company instead – the reasons why are maybe a blog for another day …