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10 tips to make the Making Tax Digital switch simple

If the words “Making Tax Digital” (MTD) fill you with confusion or worry, you’re not alone. HMRC is rolling out a new way for the self-employed and landlords to manage and file their taxes, and it means ditching paper records and manual tax returns. 

Instead, you’ll submit quarterly updates and an end-of-year tax return to HMRC, all using approved software. Luckily, Monzo will be able to help you with this if you’ve got a business account.

The goal is to make tax less stressful, reduce errors, and give you a clearer picture of your business’s finances. Let’s break down exactly how to keep the switch simple, stress-free, and (dare we say it) beneficial for your business.

1. Make sure you know your MTD start date

Timing is everything. HMRC is phasing in MTD for Income Tax, and you’ll have a different start date depending on your qualifying income. So it’s important you know when it applies to you:

  • £50,000+ qualifying income in the 2024/25 tax year: You’ll need to switch from April 2026.

  • £30,000+ qualifying income in the 2025/26 tax year: It’s April 2027 for you.

  • £20,000+ qualifying income in the 2026/27 tax year: Yours is April 2028.

Typically, you don’t have to file tax digitally in your first year of trading. 

If you’re not sure where you stand, check your last tax return, talk to your accountant (if you have one), or use HMRC’s tool to find out.

And remember, there’s nothing stopping you from starting to file your tax digitally earlier than your allocated start date. These dates are just the point by which you must have made the switch.

 2. Be clear on the income threshold (it’s gross, not net)

There’s often confusion here. The MTD threshold is based on your qualifying income, which is your gross earnings, not your profit after costs.

  • If you’re a sole trader who also has rental property, you add both incomes together to work out if you’re over the limit.

  • It doesn’t matter how much your expenses are, or what you take home after costs.

Getting this bit wrong could leave you unprepared, so double check all your sources of income before you decide when to switch. You can also use HMRC’s online tool to check if you hit the income threshold.

3. Keep business finances and personal money separate 

If you mix your business and personal spending in one account, your tax software will scoop up everything — food shops, streaming subscriptions, even that quick pint after work. So when it’s time to file your taxes, you’ll have to dig through all those transactions just to figure out what’s business and what’s not.

Having a separate business account keeps things tidy. With Monzo Business, you get a free account that connects right to a built-in Making Tax Digital tool, so you can file straight to HMRC.

4. Start as early as possible 

Your deadline might sound far off, but don’t wait to embrace Making Tax Digital earlier. Moving to a new system can take time, so the more practice you have, the better you’ll be by the time your official start date comes round.

By filing taxes the digital way early on, you can:

  • Get to grips with your new software at your own pace

  • Pick up support and training while it’s quieter

  • Fix any teething problems before they matter (before penalties come into play)

  • Get a better idea of how much tax you’ll need to pay

5. Pick MTD-compatible software

HMRC says you must use approved software that can submit updates digitally, straight to their systems. Monzo is HMRC-recognised for MTD, so you can file tax easily, right from your account.

Filing your tax digitally has other perks, too, like:

  • Your data’s always backed up

  • You can access your accounts anywhere

Steer clear of manual spreadsheets. They might work for simple sums, but they don’t always fit MTD rules.

6. Get on top of digitising receipts and invoices

There’s no need to wait for MTD’s official deadlines to go fully digital. Using an app to snap and upload receipts and invoices as soon as you get them saves you time later. Monzo’s app and other accounting platforms let you:

  • Take a photo of receipts on the go and link directly to each transaction

  • Categorise spending as it happens

  • Cut down on paperwork and missed expenses

The less you leave until the end of the quarter, the easier your reporting will feel.

7. Talk to your accountant as soon as possible (if you have one)

You don’t need an accountant for Making Tax Digital, but if you have one, or you want one, now’s the time to check in with them about how you’re going to work together with MTD in mind. Don’t assume they’ll handle everything:

  • Ask how they’re approaching MTD

  • Agree on who’s doing what in your workflow

  • Check if your software lets them work with your records directly (Monzo’s digital records are easy to share with accountants)

Getting on the same page early will stop any confusion or doubling up on work later on.

8. Get to grips with digital links

You might have heard jargon-heavy phrases like “digital links” tossed around. Here’s what it really means. For your tax records to be compliant for MTD, there must be digital links between the software you use for your digital records and the software you use to report to HMRC. The simplest way of doing this is to use an MTD-compatible software that does both tasks, which Monzo does. 

If you have a more complex software setup or use ‘bridging software’ to connect to your spreadsheets, you’ll need to make sure you’ve got digital links in place:

  • Digital links are just electronic transfers. Sending spreadsheets by email, uploading to a cloud drive, or using a USB stick to move files around. They all count as a digital link.

  • Copying and pasting doesn’t count as a digital link.

9. Mistakes in quarterly reports can be fixed

Nobody gets everything right the first time, especially when adjusting to a new system. And that’s OK. Remember:

  • Quarterly updates are cumulative. That means if you make a mistake, you can put it right next quarter when you submit your next update.

  • There are no penalties for mistakes on quarterly MTD submissions, but HMRC can issue fines for deliberately withholding information.

  • There are still penalties for errors on yearly returns.

Monzo’s direct filing link to HMRC means your reports stay accurate and up-to-date, and correcting errors is much less hassle than you’d think.

10. See it as an opportunity, not just a hassle

It’s normal to worry about extra admin, but MTD can actually make your life easier. Especially if you have software that connects your business accounts directly with HMRC.

Some of the ways the new system might help you:

  • It’ll take the guesswork out of your business’s finances with real-time data

  • You can say goodbye to piles of paper, endless receipt hunting, and last-minute panic

  • You can make better business decisions by seeing where things stand at a glance

You can file tax straight from Monzo to HMRC, ready for HMRC’s new rules coming in April 2026. Apply for a free business bank account to get on the waitlist.

Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.