The UK government’s Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is being promoted as the future of tax compliance. However, for small businesses, freelancers, and self-employed professionals, it could bring significant financial and administrative challenges. With mandatory digital tax reporting and quarterly submissions, MTD-ITSA is set to increase workload, leaving many struggling to keep up.
At Jungle Tax, the leading tax advisor for creatives, we believe these changes pose a major threat to self-employed individuals and small creative businesses. Let’s break down what MTD means, why it could be problematic, and how to prepare.
What is Making Tax Digital (MTD) for Income Tax?
The MTD-ITSA initiative requires businesses, self-employed individuals, and landlords earning over:
- £50,000 (from April 2026)
- £30,000 (from April 2027)
to follow strict digital tax rules, including:
- Maintaining digital records of income and expenses
- Submitting tax returns quarterly instead of annually
- Using HMRC-approved software for bookkeeping and tax filings
While the goal is to streamline the tax system, this shift adds complexity, increases costs, and places a heavier burden on freelancers and small business owners.
Why MTD-ITSA is Bad News for Small Businesses
1. Increased Administrative Burden
Currently, self-employed professionals submit tax returns once a year. Under the new system, they must file five times annually—four quarterly updates plus an end-of-year submission. This change means:
- More time spent on paperwork and tax preparation
- Higher costs for software and professional services
- Less focus on business growth and creative work
2. Rising Costs of Compliance
To comply with MTD-ITSA, small businesses and freelancers will need to invest in:
- MTD-compliant bookkeeping software (often requiring paid subscriptions)
- Higher accountant fees for quarterly filings
- Possible penalty payments for late or incorrect filings
For creative professionals operating on tight margins, these extra costs could negatively impact profitability.
3. Unfair to Freelancers and the Self-Employed
Freelancers and gig workers often experience fluctuating income. MTD-ITSA requires quarterly tax estimates, which means paying taxes throughout the year—even if earnings drop unexpectedly.
This rigid structure does not accommodate the unpredictable nature of freelance income, making cash flow management more difficult.
4. Higher Risk of Tax Errors and Penalties
More frequent filings increase the risk of errors, leading to:
- More HMRC investigations into self-employed businesses
- Fines and penalties for late or incorrect submissions
- Unnecessary stress and potential financial setbacks
Many small business owners lack the resources to keep up with frequent tax reporting, increasing the likelihood of accidental non-compliance.
How Jungle Tax Helps You Stay Compliant
At Jungle Tax, we specialize in helping freelancers, small businesses, and creatives navigate HMRC’s tax regulations. Our expert accountants ensure you remain compliant without unnecessary stress.
✅ Automating Your Bookkeeping
We set up MTD-compliant accounting software, eliminating the hassle of manual record-keeping.
✅ Strategic Tax Planning
Quarterly filings don’t just mean compliance; they offer opportunities to reduce tax liability. We help maximize deductions and lower tax bills.
✅ Avoiding Penalties
Our tax professionals track deadlines, file submissions, and ensure full compliance, so you never miss a reporting period.
✅ Personalized Tax Advice for Creatives
Every freelancer and small business is unique. Our tailored tax strategies ensure you’re paying the right amount—not overpaying.
Prepare for MTD-ITSA Now
If you’re a freelancer, self-employed professional, or small business owner, the impact of MTD-ITSA is unavoidable. However, with the right support, you can minimize costs, avoid penalties, and simplify compliance.
Don’t wait until it’s too late! Jungle Tax is here to help you transition smoothly into the new system.
📞 Book a free consultation today and let Jungle Tax take the stress out of MTD!