Common Making Tax Digital Mistakes (MTD for Income Tax 2026–2028) — and How to Avoid Them

Making Tax Digital (MTD) for Income Tax is a big change, but it doesn’t need to be stressful. Most problems we see come from a handful of common mistakes: leaving things too late, keeping the wrong sort of records, or assuming quarterly updates work like a tax return.

This guide focuses on the MTD for Income Tax (ITSA) rollout from April 2026, and the practical steps you can take now to stay compliant and keep your admin under control.

The 12 most common MTD mistakes (and how to avoid them)

Below are the issues that most often lead to late submissions, messy records, and avoidable stress. For each one, we’ve included a simple fix you can put in place straight away.

1) Assuming MTD is “just doing Self Assessment online”

The mistake: Thinking MTD for Income Tax is simply a new portal to file the same annual return.

Why it causes problems: Under MTD ITSA, you’ll generally need to:

• keep digital records of income and expenses,
• send quarterly updates,
• complete year-end finalisation (often referred to as EOPS and a Final Declaration).

How to avoid it: Plan for MTD as a process, not a single deadline. If you’re used to doing everything in January, start moving to a monthly routine now (even before you’re mandated).

2) Waiting until the month before April 2026 to set up software

The mistake: Leaving software selection, set-up, and linking to HMRC until the last minute.

Why it causes problems: The first quarter comes around quickly, and set-up always takes longer than people expect (bank feeds, categories, opening balances, learning the app, and getting used to capturing receipts).

How to avoid it:

• Choose your MTD-compatible approach at least 2–3 months before your start date.
• Do a short “test month” of record keeping so you can iron out issues before you have deadlines.

3) Thinking spreadsheets alone will be fine

The mistake: Assuming a spreadsheet by itself is enough for MTD ITSA.

Why it causes problems: MTD requires a digital link between your records and what is sent to HMRC. In many cases, that means you’ll need bridging software (or accounting software) to submit updates from spreadsheet data.

How to avoid it: If you love spreadsheets, that’s fine—just make sure you have an MTD plan that includes:

• a clean spreadsheet structure (income lines, expense categories, dates), and
• bridging software or an integrated tool that can submit to HMRC.

If you’re unsure whether your spreadsheet set-up will meet the rules, get it checked before the first quarterly update is due.

4) Mixing personal and business transactions in one bank account

The mistake: Using one current account for everything.

Why it causes problems: Under MTD, you’ll be updating records more often. If every grocery shop, direct debit, and personal transfer sits alongside business income, it becomes harder to categorise transactions quickly and confidently.

How to avoid it: Consider a separate business account (even if you’re a sole trader). At a minimum, keep business income and costs clearly labelled, and set a monthly habit of reviewing and categorising transactions.

5) Not keeping the right evidence for expenses

The mistake: Relying on memory, or keeping a pile of paper receipts without a system.

Why it causes problems: You need to be able to support what you claim. Also, if you’re trying to do quarterly updates properly, you’ll want receipts to hand so you can categorise costs correctly.

How to avoid it:

• Use an app or email folder to store receipts as you go.
• Take photos of paper receipts promptly (they fade).
• Write a short note on the receipt if the business purpose isn’t obvious.

6) Misunderstanding what quarterly updates are (and aren’t)

The mistake: Assuming quarterly updates are the same as a quarterly tax return, or that they will calculate your final tax bill perfectly.

Why it causes problems: Quarterly updates are summaries sent during the year. They’re useful, but they’re not the final word. Adjustments (such as accounting changes, some claims, and final checks) are typically dealt with at year end.

How to avoid it: Treat quarterly updates as a way to stay on top of your figures, not as the moment you “finalise” your tax. Keep good records throughout the year so the year-end finalisation is straightforward.

7) Filing late because you didn’t diarise the new deadlines

The mistake: Only tracking 31 January and forgetting MTD brings multiple submission points.

Why it causes problems: Late submissions can lead to penalties. Even organised people can slip up if they haven’t built the quarterly rhythm into their calendar.

How to avoid it: Put recurring reminders in your diary now (and set them earlier than you think you need). A sensible routine is:

• weekly: capture receipts,
• monthly: reconcile bank transactions,
• quarterly: review totals and submit the update.

8) Guessing categories instead of using consistent expense headings

The mistake: Posting the same type of cost to different categories each quarter (for example, putting software under “general”, then “admin”, then “other”).

Why it causes problems: Inconsistent categories make your reports unreliable and slow down year-end finalisation. They can also make it harder to spot what’s really going on in your business.

How to avoid it: Set a simple chart of categories you’ll stick to. If you’re unsure, keep it basic: motor costs, travel, materials, subcontractors, telephone, software, insurance, rent, and so on. The goal is clarity and consistency.

9) Forgetting about property income record keeping (for landlords)

The mistake: Treating rental income as an “add-on” and only looking at it once a year.

Why it causes problems: If you have property income, you may need to keep separate digital records and include those figures within your MTD submissions (depending on how your affairs are structured and what HMRC requires).

How to avoid it: Keep a dedicated folder (or tracking system) for each property:

• rent received (with dates),
• letting agent statements,
• repairs and maintenance invoices,
• insurance, safety certificates, and compliance costs.

If you’re not sure what counts as a repair versus an improvement, ask before you submit—this is one of the most common areas of confusion.

10) Claiming mileage (or vehicle costs) without a clear method

The mistake: Mixing methods, forgetting logs, or estimating mileage at the end of the year.

Why it causes problems: Vehicle costs can be perfectly legitimate, but they need to be claimed correctly and supported. Under more frequent reporting, “I’ll sort it later” often turns into “I can’t remember”.

How to avoid it: Choose a method and stick to it. If you use mileage, keep a simple log (date, journey, miles, reason). Many apps make this easy, but a consistent spreadsheet can work too.

11) Assuming your accountant will “just handle it” without your input

The mistake: Believing MTD removes the need for you to keep on top of your records because an accountant can do it all at year end.

Why it causes problems: You remain responsible for keeping records and meeting deadlines. Accountants can absolutely support you (and we do), but we still need timely information, access to software, and a clear picture of what transactions relate to.

How to avoid it: Agree a simple routine with your accountant:

• who posts transactions,
• who reviews and reconciles,
• what you need to provide and by when,
• when quarterly reviews happen.

12) Not checking whether you’re actually in scope (or when you will be)

The mistake: Assuming you’re not affected because your profits are low, or because you only have a small side income.

Why it causes problems: The thresholds are based on income (turnover/gross rents), not profit. Someone with high turnover and high costs can still be brought into MTD.

How to avoid it: Look at your most recent tax return figures and identify your gross self-employed and/or property income. If you’re near:

• £50k (April 2026),
• £30k (April 2027),
• £20k (April 2028),

…it’s wise to plan early. Even if you’re not mandated yet, adopting digital record keeping now usually makes life easier.

Common MTD questions we’re asked (quick, plain-English answers)

Can I just submit nil quarterly updates and do it properly at year end?

If you have trading or rental activity, sending nil updates when you do have income and expenses is asking for trouble. Quarterly updates are meant to reflect what’s happening. If a quarter genuinely has no activity, that’s different—but most businesses and landlords will have something to report.

Does MTD mean I’ll have to pay tax quarterly?

MTD for Income Tax introduces quarterly reporting. It does not automatically mean quarterly payments for everyone. Payment rules can change over time, but don’t assume your payment dates change just because you’re submitting updates more often. If you’re unsure, ask—because planning cash flow around tax is important.

If everything is digital, do I still need an accountant?

Some people will manage fine with software alone. Many will still want support—especially where there are multiple income streams, property, capital allowances, or simply a desire to stay confident and compliant. Software is a tool; it doesn’t replace judgement, checks, or advice.

How to choose an MTD approach that won’t create extra work

In practice, you have three common routes:

1. Accounting software (often easiest for bank feeds, invoicing, and quarterly submissions)
2. Spreadsheets + bridging software (works well if your records are tidy and consistent)
3. Hybrid approach (for example, spreadsheet tracking with an accountant posting journals and submitting)

The “best” option is the one you’ll actually keep up with. If you dislike admin, choose something that reduces manual work (bank feeds, receipt capture, simple rules). If you’re confident with spreadsheets, keep them—but make sure your submission method is compliant.

A gentle warning: the biggest risk is treating MTD as a one-off project

MTD is not a form you complete once a year. It’s a habit. The people who find it easiest are the ones who build a simple routine they can stick to—even when they’re busy.

If you take one thing from this article, let it be this: start earlier than you think you need to. A small amount of regular admin is far kinder than a last-minute scramble under pressure.

MTD readiness checklist (printable)

If you’d like, Tax Digital can help you work out when you’ll be brought into MTD, set up a tidy record-keeping system, and make sure your quarterly updates are submitted on time with confidence.