Making Tax Digital is now a reality for hundreds of thousands of sole traders and landlords, but plenty of confusion remains about what the rules actually mean.
By August 2026, more than 570,000 people had signed up for Making Tax Digital for Income Tax, and over 436,000 had successfully completed their first quarterly update. HMRC has also started to sign up people who should already be using MTD but haven’t registered.
Yet some common Making Tax Digital myths continue to cause confusion.
Here are some of the biggest Making Tax Digital myths, explained from a bookkeeping perspective.
Myth 1: Making Tax Digital is optional
FALSE.
Using the system is legally required if you meet the mandatory Making Tax Digital for Income Tax rules.
Since 6 April 2026, MTD has applied to Self Assessment registrants with self-employment or property income exceeding £50,000.
This threshold will decrease to over £30,000 from April 2027 and over £20,000 from April 2028.
If you’re already using MTD but haven’t signed up, ignoring it won’t exempt you from the requirement. HMRC confirmed that starting September 2026, they will begin signing up individuals whose records indicate they should be using MTD but haven’t registered yet.
Myth 2: Quarterly updates mean paying tax four times a year
FALSE.
One common misconception about Making Tax Digital is that quarterly updates create four separate tax payment deadlines.
In reality, every three months, compatible software compiles your digital income and expense data and sends a summary to HMRC.
These are called quarterly updates, not tax returns.
For the 2026/27 tax year, the deadlines are 7th August 2026, 7th November 2026, 7th February 2027, and 7th May 2027. Your main tax payment due date remains 31st January after the tax year ends.
Therefore, more frequent reports do not mean you need to pay your Income Tax quarterly.
Myth 3: I have MTD software, so I am compliant
FALSE.
Using compatible software is only part of Making Tax Digital. The software must contain accurate information.
You still need to create and maintain digital records of relevant self-employment or property income and expenses, which are used for your quarterly updates.
For example, your software might import the same £750 payment twice or miss recording some expenses. While the software may be suitable for MTD, the records within can still have errors.
That’s why bookkeeping remains essential.
Software helps manage and submit data, but regular bookkeeping ensures the recorded information is accurate and makes sense.
Myth 4: My bookkeeper handles MTD, so I do not need to think about it
NOT QUITE.
A bookkeeper can significantly reduce your workload by managing your digital records, reconciling accounts, spotting missing details, and preparing your books for quarterly updates.
However, they still require information from you. For example, if you make a personal purchase, lose an invoice, or receive income outside your usual process, you may need to clarify those transactions.
Making Tax Digital (MTD) works best when you and your bookkeeper regularly share and update information.
The goal is to keep your records current during the quarter, instead of submitting three months of paperwork just before the deadline.
Myth 5: I only rent out one property, so MTD does not apply to me.
FALSE.
The number of properties you own does not influence whether MTD for Income Tax applies.
What matters is if you meet HMRC’s criteria, including your qualifying income.
You can combine self-employment and property income to determine this qualifying income. For example, someone with one rental property and self-employed income might still be subject to Making Tax Digital if their total qualifying income exceeds the threshold.
Don’t assume that owning a few rental properties automatically exempts you from MTD.
Myth 6: There are no penalties this year, so quarterly deadlines do not matter
FALSE.
A first-year concession is in place, yes, but deadlines still apply. HMRC will not assign penalty points for late quarterly updates during the 2026/27 tax year.
Nonetheless, you’ll still need to maintain digital records and submit the quarterly updates on time before filing your tax return.
Penalties may still be imposed for late tax returns and payments. After 2026/27, missing quarterly updates can lead to penalty points.
For those required to use MTD for Income Tax, four penalty points can result in a £200 fine, with an additional £200 for each further missed deadline at the same threshold.
So the first year should be an opportunity to build a reliable bookkeeping routine, not an excuse to ignore quarterly reporting.
Myth 7: Making Tax Digital means I cannot use paper receipts anymore
FALSE.
Making Tax Digital requires businesses to create and keep income and expense records electronically.
This doesn’t mean all supporting documents must disappear from your business. HMRC makes a clear distinction between the digital records needed for MTD and the original records or supporting documents you may still need to keep, like paper receipts.
The key is to enter relevant transaction details into your digital bookkeeping system within the designated timeframe.
Digitally capturing receipts can streamline your process, so taking a photo or uploading a copy is typically easier to find later than a small paper slip in a coat pocket.
Myth 8: Making Tax Digital means I will pay more tax
FALSE.
The Making Tax Digital initiative changes the way you document and report your financial data. It does not impose an additional Income Tax charge solely due to your participation in MTD.
Quarterly submissions provide HMRC with summaries of the income and expense details contained in your digital records.
You are not required to make any accounting or tax adjustments before submitting each quarterly update.
You will still need to complete the necessary year-end procedures and pay the tax owed by the specified deadline.
The key difference is that your records are managed and reported more frequently. The larger concern is whether your bookkeeping is accurate.
How Rosemary Bookkeeping can help with Making Tax Digital
You don’t have to master Making Tax Digital on your own.
Your local Rosemary Bookkeeper can assist you in keeping the bookkeeping aligned with MTD precise, systematic, and current.
This support may include managing your digital documentation, tracking income and expenditures, reconciling your financial statements, advising on appropriate software, and preparing your records for MTD quarterly submissions.
With the next quarterly deadline on 7 November 2026, now is a good time to check whether your bookkeeping is actually ready. (Making Tax Digital for Income Tax)
Don’t let Making Tax Digital myths leave you unsure what you need to do.
