Is Making Tax Digital Replacing Self Assessment? What Actually Changes

The Quick Answer

MTD vs Self Assessment: Side-by-Side Comparison

What Stays Exactly the Same

Most of what you currently do doesn't change at all:

• Tax calculations — Your tax bill is calculated the same way. Same rates, same thresholds, same allowances.
• Payment dates — You still pay tax by 31 January (and 31 July for payments on account). MTD doesn't change when you pay.
• Expenses — You claim the same allowable expenses. Nothing changes about what you can deduct.
• Personal allowance — Still £12,570. Not affected by MTD.
• National Insurance — Calculated and paid the same way.
• UTR number — You keep your existing Unique Taxpayer Reference.
• Government Gateway — You still use the same login (though you'll need to sign up for MTD through it).
• Other income reporting — Employment income, dividends, savings interest, capital gains — all still reported through Self Assessment exactly as before.

If your tax affairs are simple (just self-employment income), the annual process is very similar — it just has four extra touchpoints during the year.

What Changes Under MTD

The changes are significant but manageable:

1. Digital Record Keeping (Mandatory)

Currently, you can keep your records however you like — a notebook, a spreadsheet, receipts in a bag. Under MTD, your income and expense records must be kept in MTD-compatible software.

This is the biggest adjustment for people who currently do everything on paper. You'll need to either:

• Use accounting software directly (FreeAgent, Xero, QuickBooks, etc.)
• Use HMRC's own basic MTD software
• Use bridging software that connects your existing spreadsheet to HMRC (though you still need digital records)

See our MTD bridging software guide for more on that option.

2. Quarterly Updates (New)

Four times a year, you submit a summary of your business income and expenses through your MTD software. These are not full tax returns — they're running totals:

• Total income for the quarter
• Total expenses for the quarter (broken into categories)

If you're already using accounting software and entering transactions regularly, the quarterly submission is literally clicking a button. The software generates the summary and sends it to HMRC.

3. End of Period Statement (New)

After your fourth quarterly update, you submit an End of Period Statement (EOPS). This is a year-end review where you:

• Make any accounting adjustments
• Add capital allowances
• Confirm your final figures for the year

Think of it as tidying up your accounts at year-end — something most people do anyway.

4. Final Declaration (Replaces Part of Self Assessment)

The Final Declaration replaces the self-employment and property income sections of your Self Assessment tax return. It confirms your total income, expenses, and profit for the year.

If you have other income sources (employment, dividends, etc.), you'll still report those through the existing Self Assessment process.

Quarterly Updates: What You Actually Submit

The quarterly updates are simpler than most people expect. Here's what a typical submission looks like:

For a Simple Sole Trader

That's it. The software pulls these numbers from the transactions you've already entered. You review them, click submit, and you're done.

Time commitment: If you're keeping your records up to date, the actual quarterly submission takes 10-15 minutes. The time investment is in the ongoing bookkeeping — but if you're doing that properly already, there's almost nothing extra.

Simplified Three-Line Accounts

If your turnover is under the VAT threshold (currently £90,000), you can use simplified "three-line accounts" for your quarterly updates:

1. Total income
2. Total expenses
3. Net profit

You don't need to break expenses into categories. This makes the quarterly submission even quicker.

The New Annual Process (Step by Step)

Here's what your tax year looks like under MTD, compared to now:

Currently (Self Assessment Only)

1. Keep records throughout the year (any format)
2. File Self Assessment tax return by 31 January
3. Pay tax by 31 January (+ 31 July for payments on account)

Under MTD (From April 2026)

1. Keep digital records in MTD software throughout the year
2. Submit quarterly update #1 (by 7 August for Q1: 6 Apr – 5 Jul)
3. Submit quarterly update #2 (by 7 November for Q2: 6 Jul – 5 Oct)
4. Submit quarterly update #3 (by 7 February for Q3: 6 Oct – 5 Jan)
5. Submit quarterly update #4 (by 7 May for Q4: 6 Jan – 5 Apr)
6. Submit End of Period Statement
7. Submit Final Declaration by 31 January
8. Pay tax by 31 January (+ 31 July, unchanged)

For the complete deadline calendar, see our MTD Quarterly Deadlines guide.

Software: What You Actually Need

This is where most people get confused. Let's be clear:

• You need MTD-compatible software. This is non-negotiable — you can't submit quarterly updates through the HMRC website like you do with Self Assessment.
• It doesn't have to be expensive. There are free options (including HMRC's own software) and paid options starting from £10-15/month.
• It doesn't have to be complicated. For a simple sole trader with straightforward income and expenses, the simplest options are more than adequate.

Quick Software Comparison

For the full comparison with features, pros, cons, and recommendations: MTD Software: Free vs Paid (2026).

Your New Reporting Calendar

Here's the 2026/27 tax year at a glance:

Who's Affected and When

The income threshold is based on gross income (turnover), not profit. If you invoice £55,000 but have £20,000 in expenses, you're above the £50,000 threshold even though your profit is only £35,000.

5 Myths About MTD and Self Assessment

Myth 1: "MTD replaces Self Assessment entirely"

Reality: It adds quarterly reporting to Self Assessment. You still file annually. You still pay on the same dates. The Final Declaration replaces one section of your return, not the whole thing.

Myth 2: "I'll need to pay tax quarterly"

Reality: You submit information quarterly, not money. Your tax payment dates don't change. You still pay by 31 January and 31 July as before. (Note: HMRC has explored the idea of moving to quarterly tax payments in future, but this is not part of the current MTD rollout.)

Myth 3: "MTD software costs hundreds of pounds"

Reality: There are free options, and paid options start from £10-15/month. For a simple sole trader, the free or cheapest tier is usually sufficient. For a detailed comparison, see our software comparison guide.

Myth 4: "I need an accountant for MTD"

Reality: If you currently do your own Self Assessment, you can absolutely handle MTD yourself. The quarterly updates are simpler than a full tax return. An accountant is helpful if you want them, but not required.

Myth 5: "If I get the quarterly updates wrong, I'll be fined"

Reality: HMRC has confirmed there are no penalties for inaccurate quarterly updates, as long as your Final Declaration (annual return) is correct. The quarterly updates are treated as estimates/running totals. You can adjust and correct as you go.

Your Action Plan

The Bottom Line

Making Tax Digital is not the end of Self Assessment — it's an evolution of it. You still file annually, you still pay on the same dates, and your tax calculation doesn't change. What changes is that you add quarterly check-ins and move your records into digital software.

For most people already using accounting software, it's a minor adjustment. For those on paper or spreadsheets, it's a bigger shift — but the grace period gives you a full year to get comfortable without penalty risk on quarterly submissions.

The key message: don't panic, but don't ignore it either. Start preparing now and the transition will be smooth.

Related Guides

• What Happens If You Ignore Making Tax Digital?
• MTD Software: Free vs Paid — What You Actually Need (2026)
• MTD Penalties Explained: Complete Guide (2026)
• MTD Penalty Grace Period: No Fines for Your First Year
• MTD Quarterly Deadlines 2026/27
• Got an HMRC MTD Letter? Here's What to Do Next
• Free MTD Readiness Checker Tool