Making Tax Digital for Income Tax Explained — Who's Affected and When (2026-2028)

Why FreeAgent is suddenly everywhere

Three things converged in 2024-26. First, MTD for Income Tax stops being a vague future and starts being a £50K threshold from April 2026 (then £30K from 2027, £20K from 2028 — see HMRC’s phased timeline). Second, NatWest, RBS and Mettle (the digital arm) bundled FreeAgent free with every business current account — turning a £19/mo product into a £0 product for approximately 3 million UK SMEs. Third, FreeAgent was on HMRC’s MTD-compatible list from the day Income Tax compatibility shipped.

The result: search interest for freeagent accounting software is up 233% year-on-year. None of this means FreeAgent is the right app for you — but if you are a UK sole trader earning between £30K and £50K and you bank with NatWest, RBS, or Mettle, you would be paying twice not to use it.

Sources: gov.uk/guidance/check-if-youll-need-to-sign-up-for-making-tax-digital-for-income-tax; mettle.co.uk/business-banking/free-accounting-software; gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax

The phased rollout — exact dates

Date	Threshold	Who is affected
April 2026	Over £50,000	Self-employed individuals and landlords with combined qualifying income over £50K
April 2027	Over £30,000	Same categories, lower threshold
April 2028	Over £20,000	Subject to legislative confirmation

“Qualifying income” means total gross income from self-employment plus property rental income. If you earn £35,000 freelancing and £20,000 from a rental property, your qualifying income is £55,000 — you are in scope from April 2026.

The income threshold is based on the previous tax year’s figures. Your 2024-25 Self Assessment return determines whether you need MTD from April 2026.

What MTD for Income Tax actually requires

The practical change is a shift from one annual Self Assessment to four quarterly digital submissions plus two year-end steps.

Quarterly updates (four per tax year): Each quarter, you submit a summary of your income and expenses for that period through your MTD-compatible software. This is a relatively simple submission — it is not a full tax return. Your software prepares it from your categorised records and submits directly to HMRC’s API.

Quarter deadlines (illustrative for April 2026 start):

Q1 (April-June): 5 August
Q2 (July-September): 5 November
Q3 (October-December): 5 February
Q4 (January-March): 5 May

End of Period Statement (EOPS): At the end of the tax year, you confirm all income and expenses are correct and complete. This is your opportunity to add allowances (trading allowance, property income allowance, etc.) and adjustments.

Final Declaration: Replaces the Self Assessment return. Combines all income sources (employment, self-employment, property, investments) and confirms your total tax liability for the year. Due by 31 January, same as the current Self Assessment deadline.

What you do NOT need to do (yet)

Pay tax quarterly. You still pay twice per year (31 January and 31 July).
Submit until your threshold is crossed.
Use any specific software brand — any software on HMRC’s compatibility list qualifies.

MTD-compatible software list (verified 2026-05-19)

HMRC maintains the official list at gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax. As of 2026-05-19, verified compatible:

FreeAgent — free with NatWest/RBS/Mettle; £19/mo retail
Xero — Standard plan and above; from £33/mo
QuickBooks Online — Simple Start and above (not Self-Employed); from £35/mo (note US pricing — UK pricing differs)
Sage Business Cloud Accounting — from £14/mo

Not on the HMRC MTD for IT list as of 2026-05-19: FreshBooks, Wave, Bonsai, HoneyBook.

Always verify the current list on gov.uk — compatibility status can change with software updates.

The bridging software option (for spreadsheet holdouts)

If you insist on keeping your records in Excel, bridging software is a digital “adapter” that takes your spreadsheet data and submits it in the MTD-compliant format to HMRC. Options include Absolute MTD, BTC Software, and TaxCalc.

Bridging software is a valid short-term solution, but it adds a step and a cost (typically £10-£30/year for sole traders). Most accountants recommend migrating to proper MTD-compatible software for the 2026 mandatory start — the quarterly submission burden makes the dual-system overhead unsustainable.

The FreeAgent + Mettle play for UK sole traders

If you are a UK sole trader with a qualifying income close to the £30K-£50K range and you do not have a business current account:

Open a Mettle account (free digital business account from NatWest group)
FreeAgent comes bundled at £0
Connect your existing bank via Open Banking if Mettle is not your primary account
You are MTD-ready for £0 in software costs

Mettle has no monthly fees and provides a business Mastercard debit card. The trade-off: it is a simpler account than Starling or Tide, with fewer integrations. If your business banking needs are basic, Mettle + FreeAgent is the most cost-effective MTD solution available in the UK.

What this means for your accountant relationship

Your accountant’s workflow changes under MTD. Instead of one annual data-submission, they receive quarterly records throughout the year. Most accountants are adjusting fees accordingly — some charging quarterly review fees, others moving to annual retainers that include MTD support.

Talk to your accountant before April 2026 about:

Which MTD-compatible software they recommend (their preference affects your workflow)
Whether they will handle quarterly submissions or you will
How their fees are changing

If you do not have an accountant and your income is above the threshold, now is a reasonable time to engage one — MTD creates enough complexity that the accountant fee typically pays for itself in reduced errors and missed allowances.

General information only — not tax advice. MTD rules confirmed at gov.uk — verify current thresholds and requirements before April 2026. Last reviewed 2026-05-19.