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Busting 5 Myths About Making Tax Digital for Income Tax

  • Jul 17
  • 5 min read

By Jessica | Tuesday, 14 July 2026

The countdown to Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) has officially begun. With the first major deadline arriving in April 2026, the air is filled with a mix of confusion and, frankly, a bit of dread. If you are a self-employed professional or a landlord, you’ve likely heard a dozen different things about how this new system will work.

Unfortunately, much of the information floating around is either outdated or flat-out wrong. These myths can make the transition seem far more daunting than it actually is. At Accountant Search, we believe in keeping things simple. Our goal is to match you with expert accountants who can handle the technicalities while you focus on your business. If you're still relying on the old portal, our guide to filing your tax return in the MTD era explains what the shift away from Government Gateway means in practice.

In this guide, we are going to bust five of the biggest myths about MTD for Income Tax so you can stop worrying and start planning. For a broader look at common misunderstandings, see our article on Busting 5 Myths About Making Tax Digital for Income Tax.

Myth 1: You Need to Buy Expensive, Complex Software

One of the most common fears we hear from SME owners is that they’ll have to fork out hundreds of pounds a year for high-end accounting suites.

The Reality: While "big-name" cloud accounting software is fantastic for many, it isn't your only option. There is a whole ecosystem of MTD-compatible tools designed for small-scale users. For example, some specialized tools like TaxNav are available for as little as £60 per year.

HMRC has also encouraged software providers to offer free or low-cost versions for those with simpler tax affairs. You don't need a full enterprise-level ERP system; you just need something that can record your income and expenses digitally and talk to HMRC’s servers.

A small business owner smiling confidently while using a tablet.

Myth 2: You Can’t Use Your Spreadsheets Anymore

If you’ve spent the last decade perfecting your Excel or Google Sheets setup, the idea of abandoning it for a new app might feel like a nightmare. Many business owners believe MTD means the "death of the spreadsheet."

The Reality: You can keep your spreadsheets! The rule is that the records must be digital and the submission must be digital. You can bridge the gap between your spreadsheet and HMRC using something called "Bridging Software."

Bridging software is a simple digital link that takes the totals from your spreadsheet and uploads them to the HMRC portal. It’s often the most cost-effective and least disruptive way for SMEs to comply. You can learn more about how this works in our deep dive on MTD bridging software vs. full apps.

A digital tablet showing a spreadsheet being bridged to a cloud icon.

Myth 3: It’s Too Expensive for Small Businesses and Landlords

There is a persistent myth that the "administrative burden" of MTD will eat up all your profits. Some people think they’ll need to hire a full-time bookkeeper just to manage the quarterly updates.

The Reality: MTD is designed to be scalable. If you are a landlord with a single property, your quarterly updates will be very simple. The "burden" is actually a shift in when you do the work. Instead of a mad scramble every January to find a shoe box full of receipts, you’ll be doing small, 10-minute digital updates every three months.

In the long run, most businesses find that digital record-keeping actually saves them money by identifying tax-deductible expenses they might have otherwise forgotten. If you're worried about the cost of professional help, we can help you find local accountants who offer fixed-price MTD packages specifically for SMEs.

Myth 4: HMRC Will Fine You Immediately for Every Little Mistake

There is a fear that the moment you press "submit" on a quarterly update with a typo, a penalty notice will land on your doorstep.

The Reality: HMRC has introduced a "soft landing" period and a new points-based penalty system. The goal isn't to punish people for honest mistakes while they learn the new system; it’s to encourage compliance.

Under the new points system, you only get a financial penalty after you’ve missed several deadlines and hit a certain points threshold. Think of it like a "totting up" system on a driving license. As long as you are making a "best effort" to comply, you aren't going to be hit with instant, aggressive fines. For more on this, check out our article on the HMRC soft landing period and our breakdown of The £200 Penalty Trap.

A male accountant explaining tax software to a smiling client in a modern office.

Myth 5: You Have to Be 100% Perfect from Day One

Because the term "Making Tax Digital" sounds so high-tech and final, many people assume they need to have a flawless, automated system ready the second the clock strikes midnight on April 6th, 2026.

The Reality: Awareness has grown quickly, but plenty of sole traders and landlords are still working out what the rules mean for them. Our article on MTD is Here: How Landlords and Sole Traders are Responding in 2026 gives a helpful snapshot of where people stand right now.

MTD for Income Tax is a phased approach. You only need to join when you hit specific income thresholds:

  • April 2026: If your qualifying income (business + property) is over £50,000.

  • April 2027: If your income is over £30,000.

  • Beyond 2027: Lower thresholds will be reviewed and introduced gradually.

This gives you plenty of time to transition. You don't need a perfect system on day one; you just need a compliant system. Most accountants recommend starting a year early so you can get used to the software without the pressure of a live deadline. If you want a practical roadmap, read our guide on transitioning to MTD step by step.

A professional photo of a calendar showing the year 2026 on a wooden desk.

How to Prepare Without the Stress

The secret to surviving MTD isn't finding the world’s most expensive software: it’s finding the right advice. A good accountant can help you choose the right tools (whether that's TaxNav, Xero, or a simple bridging link) and make sure your quarterly updates are submitted correctly. If you're not sure where to begin, our guide on how to find an accountant in the UK is a useful place to start.

At Accountant Search, we make it easy to find the perfect match. Whether you’re a sole trader, a landlord, or running a growing SME, we can connect you with tax experts who specialize in MTD services.

Don't let the myths keep you up at night. The transition to digital is a big change, but with the right partner, it’s just another step in your business journey.

Need help finding an MTD-ready accountant? Get started with Accountant Search today.

 
 
 

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