A working life example: MTD for beauty professionals
Meet Lorna. She’s a self-employed beautician based in Bristol, offering treatments like nails, lashes and facials. She works a mix of booked appointments and walk-ins, usually from her small rented space, with the occasional mobile appointment.
Her setup will probably feel familiar to lots of people working in beauty. Money moves quickly – lots of small payments coming in, regular costs going out, and busy periods followed by quieter ones. Some clients pay by card, some by bank transfer, and the occasional one still pays in cash.
This day-to-day reality doesn’t change under Making Tax Digital (MTD). But the way Lorna keeps track of it does.
What stays the same under MTD
MTD doesn’t change how Lorna runs her week or interacts with clients.
She’s still:
Taking bookings and seeing clients
Buying products, tools and supplies
Getting paid in a mix of card, bank transfers and cash
Balancing busy weeks with slower ones
In a nutshell, the work stays the same. What changes is how the information about her income is recorded and sent to HMRC.
What changes under MTD
Keeping digital records (and what that actually means)
Under MTD for Income Tax, Lorna needs to keep digital records of her trade income and expenses.
Basically that means:
Keeping a record of what she’s been paid
Keeping a record of her work-related expenses
And storing that information in HMRC-recognised software (rather than just paper, spreadsheets saved on her laptop, or a folder full of receipts)
A digital record doesn’t need to be complicated. It’s simply a record showing:
Income: how much she’s earned from clients
Expenses: work supplies she’s paid for like products, tools and rent for her space
What about cash payments or personal cards?
This is pretty common in beauty and wellness, and MTD allows for it.
Cash payments: if Lorna’s paid in cash, she still records the amount in her digital records, even though it didn’t go through a bank account.
Personal card payments: if she buys something for work using her personal card, she records that expense too, as long as it’s genuinely for the business.
MTD isn’t about forcing everyone to use one payment method. It’s about making sure all income and expenses are recorded digitally.
Quarterly updates to HMRC
Instead of sending everything to HMRC once a year, MTD involves sending quarterly updates.
Each update is a simple summary of:
Total income for that quarter
Total allowable expenses for that quarter
These updates:
Only focus on Lorna’s trade as beautician
Don’t include things like savings interest or capital gains
Aren’t tax bills
Don’t need every allowance or relief worked out yet
They’re snapshots that build up across the year, helping HMRC – and Lorna – see how things are going without relying on guesswork months later.
At the end of the tax year
Once the tax year finishes, Lorna submits her tax return.
This is when she:
Checks everything from the year
Adds any other income (if she has it)
Claims allowances and reliefs
Finalises her tax position with HMRC
So while information is sent during the year, there’s still a clear end-of-year moment where everything is wrapped up.
What this looks like in real life
For Lorna, MTD doesn’t change the reality of day-to-day work. She’s still getting paid by card, cash and bank transfer. And she’s still doing nail art that involves flames, gems and butterflies, all on the same hand.
But compared to the old way:
Records build up as the year goes on, rather than being pulled together at the last minute
Updates go to HMRC every quarter, not just once a year
There’s less reliance on memory, paperwork and January panic
MTD is designed to fit around the way self-employed people already work – not force everything into a once-a-year admin rush.
How this could work with Monzo
If Lorna uses a Monzo business bank account, much of her income and expenses will already flow through one place.
That means:
Card and bank payments are visible digitally
She can add cash income or personal card expenses whenever she needs to
Monzo’s built-in MTD software – which is free to use and HMRC recognised – will then use that information to send the required quarterly updates and support the end-of-year tax return.
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.
We can’t give tax or financial advice – you’ll need to speak to a professional adviser for that. But if you’d like to understand more about MTD, including who it applies to and when, you can read more in this article.