What Making Tax Digital for Income Tax actually costs

Making Tax Digital for Income Tax does not change what you owe or when you pay it. It changes how many times a year you touch the system: five filings instead of one, every one through commercial software, none through HMRC's own website. That structural change is the entire cost, and it lands as three line items — a software subscription, more work for whoever prepares your figures, and your own hours.

None of this is tax advice. It is a price list, so you can check the quote you are given against something. Scope is the UK only, and only cost; the record system that makes any of it survivable, in both the UK and the US, is a year-round set-up rather than a February scramble.

The obligation is settled. Only the price is in dispute.

MTD for Income Tax went live on 6 April 2026. You are in it now if you are a sole trader or landlord registered for Self Assessment whose qualifying income exceeded £50,000, and HMRC tests that from the return you filed for 2024/25.

The word doing the damage is qualifying. HMRC defines it as "your total income from self-employment and property. This is the amount before expenses (also known as turnover)", and the two are added together. A designer turning over £34,000 with a flat let bringing in £19,000 gross is at £53,000 and is mandated, on a profit figure that might be half that. Employment income, dividends and partnership profit shares do not count.

On 2023/24 returns that is 864,000 individuals, with roughly two million more joining across 2027 and 2028.

The one exemption worth knowing about is digital exclusion: age, a health condition or disability, religious belief, or no practical internet access. HMRC states it will not accept an application based on the time and cost of setting it up. Cost is not a ground for exemption, so it has to be priced rather than avoided.

There is no free HMRC filing route. The answer is no.

This is the most-asked sub-question and it has a one-word answer. HMRC's guidance says it plainly: "HMRC does not provide software". Once you are in MTD, the quarterly updates and the year-end tax return both go through a third-party product on HMRC's compatible software list. The free HMRC online Self Assessment form you may have used for a decade is not the route any more.

That is the fact the pricing argument turns on: you are required to acquire a commercial product. The good news, and it is genuinely good, is that some of those products cost nothing.

Free compliant software exists, and one option has no conditions attached

There are three different things people mean by "free," and conflating them is where most of the spread in public answers comes from.

The verified range for a single compliant filer is therefore £0 to about £228 a year plus VAT, and the top of that range buys a full accounting product rather than an MTD obligation. My Tax Digital appears on HMRC's list with a free version marked ready and describes itself as free for both bridging and full record-keeping, with no paid tier. That is the floor, and it is zero.

The FreeAgent arrangement is the one most often quoted as "free software" without its condition. It is free for as long as you hold one of four named UK business current accounts, so the price is really the account, and it disappears the day you change bank. If you are weighing that tie-in against staying portable, the comparison with FreeAgent on what sits around the accounting is the honest frame, and the same logic applies one tier up where Xero is priced as the day-to-day ledger rather than the tax return.

If your records already live in a spreadsheet that works, £19.75 a year plus VAT buys the submission pipe and nothing else. That is the cheapest paid answer anyone can currently evidence.

The accountant's fee is the number nobody has published

There is no independent, methodologically published survey of what UK accountants are charging extra for MTD. The one quantified claim in circulation traces back to a survey of accountancy professionals run by a tax software vendor, and that is not a number worth repeating. If you have been given one, ask where it came from.

What can be stated is the mechanism a fixed quote should be built from. Before 6 April 2026, an agent preparing a sole trader's affairs had one deadline, one set of figures and one submission. Now there are four quarterly updates plus the year-end tax return: five submissions, four of which require the books reconciled to a date rather than at leisure. The bookkeeping does not get harder. The scheduling does.

HMRC's own impact assessment is the closest thing to a neutral estimate that exists. For businesses above the £50,000 threshold it puts the average transitional cost at £285 and the average annual additional cost at £115, covering familiarisation, training, hardware, software and agent fees combined. Treat £115 a year as the government's own view of the ongoing all-in increase, and treat a quote well above it as something that needs explaining rather than something that is wrong.

Four questions that turn an open-ended engagement into a fixed one:

1. Is the quarterly update fee per submission or annual, and does it include the year-end return?
2. Who does the bookkeeping between quarters, and what happens to the fee if I fall behind?
3. Which software are you filing from, whose subscription is it, and who owns the data if I leave?
4. What is the fee if a quarter needs correcting after submission?

The fourth matters more than it looks. Quarterly updates are cumulative rather than standalone, so a correction is made in the next update rather than by refiling. An accountant charging per amendment is charging for something the system does not require.

Roughly three-quarters of businesses above the £50,000 threshold were represented by an authorised agent, on HMRC's figures. The remaining quarter are pricing this entirely on software and their own hours.

The total, worked three ways

Illustrative arithmetic, not observed data. Substitute your own hourly figure.

Two things fall out of that table. For someone doing their own books the cash cost of compliance can legitimately be zero, and anyone telling you otherwise is quoting their own price list. And the dominant line is time, which no vendor will bill you for or warn you about: six hours a year at a £60 effective rate is £360, more than the most expensive software above.

Time is also the only line you can compress. If your records are categorised as you go, the quarterly update is a report. If they are not, each quarter starts with three months of reconstruction, four times a year instead of once, and reconstruction is where deductions quietly die because an expense without contemporaneous evidence is a liability rather than a deduction.

The four deadlines, and what has to exist before each one

The dates do not move and are the same for everyone on the standard tax year. Each update covers 6 April to the end of the period, not just the last three months. Copy this somewhere you will see it.

MTD FOR INCOME TAX — QUARTERLY CHECKLIST (standard tax year)

□ 7 AUGUST — period 6 Apr to 5 Jul
Submit: cumulative totals per income and expense category,
for EACH business and EACH property source separately.
From: categorised bank transactions + sales invoices + receipts
for April, May, June.
Note: cumulative means year-to-date. Nothing is "closed."

□ 7 NOVEMBER — period 6 Apr to 5 Oct
Submit: same categories, now covering six months.
From: the same records plus July, Aug, Sep.
Note: any error in the Q1 figures is corrected here, not refiled.
Do not pay anyone per amendment.

□ 7 FEBRUARY — period 6 Apr to 5 Jan
Submit: same categories, nine months.
From: add Oct, Nov, Dec.
Note: this lands one week after the 31 Jan payment date for the
PREVIOUS tax year. They are unrelated. Do not merge them.

□ 7 MAY — period 6 Apr to 5 Apr (full year)
Submit: same categories, twelve months.
From: the full year's records.
Note: this is still a summary, not the return.

□ 31 JANUARY (following year) — the tax return
Submit: adjustments, reliefs, allowances, all other income,
then the final figure. Through software, not gov.uk.
Pay: balancing payment and first payment on account, as before.

□ NIL QUARTERS: if a source had no activity, you still submit.
□ CALENDAR PERIODS: if you elect calendar quarters (1 Apr–30 Jun etc.)
the four deadlines are unchanged. Only the period ends move.

The deadlines and the cumulative rule come from HMRC's quarterly update guidance, which is explicit that a quarterly update contains "totals for each income and expense category" and that HMRC does not receive individual transactions.

Nothing about when you pay has changed, and that is where the real money is

Quarterly updates are, in HMRC's words, "summaries, not tax returns". You still file one return a year, still pay by 31 January, and payments on account are untouched. Anyone reading "quarterly" as "you now pay four times a year" has invented a cash-flow crisis that does not exist, and the monthly set-aside that made the January bill survivable is still the mechanism that works — the monthly tax set-aside calculator has a UK preset for that arithmetic.

The penalties split the same way in HMRC's penalty guidance, and conflating them is expensive.

On top of the penalties, late payment interest runs at 7.75% from 9 January 2026, set at base rate plus 4%.

Read those two halves against each other. Missing a quarterly update this year costs zero. Paying a £9,000 bill 45 days late costs £270 at day 15, another £270 at day 30, then interest and the 10% annual charge accruing daily. The filing obligation is the one being publicised; the payment obligation is the one with money attached, and it did not change.

Three things to change this week

1. Pick software before the 7 November update, not on 6 November. If your records are already in a spreadsheet, price bridging at £19.75 a year plus VAT before you price a subscription. If they are not, start free and pay only when a feature is actually missing.
2. Ask your accountant for a fixed annual quote covering five submissions, using the four questions above. An hourly engagement across four immovable deadlines is an open-ended cost by construction.
3. Move categorisation to the week it happens. That single habit is the difference between six hours a year and twenty.

Worklyn is not MTD filing software and is not on HMRC's compatible list. It keeps the categorised records and invoices a quarterly update is built from, and exports to Xero, QuickBooks and DATEV, so the filing tool receives figures rather than a shoebox.