Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is rolling out through 2026, and the honest finding from talking to dozens of UK self-employed adults this spring is that most aren't ready. The shoebox-of-receipts-plus-spreadsheet approach that's worked for fifteen years stops working at the threshold; quarterly digital submissions become mandatory; and the accountants who'd usually catch problems at year-end have less time to catch them when there are five submissions instead of one.
The good news: the right software handles MTD ITSA without much pain. The bad news: most self-employed adults haven't yet picked the software, and finding out the night before the first quarterly deadline is a bad time to start.
The MTD ITSA basics
Self-employed and landlords above the qualifying income threshold must:
- Keep digital records in MTD-compatible software
- Submit quarterly updates of income and expenditure to HMRC
- Submit a final declaration at year-end
The threshold has rolled out in stages:
- April 2026: self-employed and landlords with combined income £50,000-plus
- April 2027 (planned): threshold drops to £30,000-plus
- Future (under consultation): potentially lower thresholds
Below the qualifying threshold, you can continue self-assessment as before. Above it, MTD ITSA is mandatory.
How to pick by your situation
UK sole trader, simple income: FreeAgent (free with Mettle) plus DIY annual return.
UK sole trader, multiple income streams: FreeAgent plus UK accountant for year-end.
UK Ltd or growing business: Xero plus UK accountant.
Self-employed first-timer, low income: stay below MTD threshold initially if possible; use FreeAgent free tier.
For most self-employed adults: FreeAgent + Mettle business banking. Genuinely free, MTD-compliant, removes most of the friction.
Software options
FreeAgent at free with Mettle business banking, £19/month standalone. Designed specifically for sole traders and small Ltds. Handles quarterly updates and year-end declarations under MTD ITSA. The interface walks you through what's needed; HMRC submission happens directly from FreeAgent. The right answer for most sole traders.
Xero at £15-£59/month. The dominant SME accounting platform. MTD ITSA support is built in. The right answer for Ltds and growing businesses.
QuickBooks at £14-£37/month. The third option, particularly common for arms of US-headquartered businesses.
Spreadsheet-based bridging software at £30-£100/year (Absolute Excel Tax, 123 Sheets). If you must stick with spreadsheets, MTD-compatible bridging software submits Excel-based records to HMRC. Useful for very small businesses; not generally recommended over proper accounting software.
Do you need an accountant?
Yes, definitely: Ltd companies (corporation tax filing has complexity beyond DIY); self-employed with multiple income streams (UK + abroad, employment + self-employment, multiple landlord properties); high earners (self-employed >£100k income, tax planning is meaningful); anyone with property gains, business sale, or unusual situations; anyone who finds tax stressful regardless of income.
Probably yes for first 1-2 years: New self-employed adults — get the categorisation right, then DIY in subsequent years if simple.
DIY is fine: simple sole trader, single income source, no complex deductions; comfortable with FreeAgent or Xero; income under £40-£50k where errors carry less consequence.
For most self-employed adults: an accountant for £400-£800/year is a worthwhile insurance against errors and missed deductions. Cheaper than the cost of getting tax wrong.
How to find a good accountant
Three routes:
- ICAEW / ACCA / AAT directories — chartered or certified accountants, regulated, professional indemnity insured
- FreeAgent / Xero / QuickBooks accountant directories — accountants who already use your software
- Word of mouth from other self-employed adults in your industry
Avoid: high-street tax shops focused on volume PAYE refunds; "tax savings" companies promising aggressive scheme arrangements; anyone not a member of a regulated accounting body.
DIY self-assessment, what you actually need to know
If you DIY:
- Keep records as you go in FreeAgent or Xero — the year-end is much harder if you compile from scratch
- Save receipts digitally (Dext app or similar) immediately
- Quarterly updates under MTD ITSA are not full tax calculations, just summary income/expenses
- Year-end final declaration is more complex — this is where most DIY filers benefit from an accountant
- Submit by 31 January for paper-equivalent online return
Five common self-employed tax mistakes to avoid
- Mixing personal and business expenses — open a separate business account (Mettle, Tide, Starling)
- Forgetting the trading allowance — first £1,000 of self-employed income is tax-free even before claiming expenses
- Missing legitimate deductions — home office, professional subscriptions, mileage at HMRC rates, training relevant to existing trade
- Not putting money aside for tax — open a savings account and put 20-25% of income there
- Missing the second payment on account in July — payment-on-account system is unusual; budget for it
The recommended setup for most sole traders
- Open Mettle business account — free, includes free FreeAgent
- Use FreeAgent for everything — invoices, expenses, mileage logging
- For year 1, hire an accountant to do your first year-end (~£400-£800)
- From year 2, DIY if confident or stick with the accountant if not
- Set aside 25% of income in a separate Cash ISA for tax
For Ltds: Xero plus accountant as the standard setup. £40-£70/month software plus £150-£300/month accountant for an active small Ltd is typical.
For UK landlords: dedicated landlord software (Hammock, Landlord Vision) plus accountant familiar with property tax.
What's coming through 2027-28
- MTD ITSA threshold expected to drop further
- More software providers competing on MTD compliance
- Possible reform of payment-on-account system (under HMRC consultation)
Stay engaged with HMRC's guidance — UK tax rules change yearly, and MTD specifically is still rolling out.
This article is general consumer information for UK self-employed adults, not regulated tax advice. UK tax is fact-specific; consult a UK accountant or tax adviser for material decisions.
Affiliate disclosure: Morningfold has affiliate partnerships with FreeAgent, Xero, QuickBooks, Mettle, and several UK accountancy directories. See editorial standards.