The UK government’s Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is being hailed as the future of tax compliance, but for small businesses and freelancers, it could be a financial nightmare. With mandatory digital tax reporting and quarterly submissions, MTD-ITSA is set to increase administrative burdens, leaving many small business owners struggling to keep up.
As Jungle Tax, the leading tax advisor for creatives, we believe that HMRC’s new MTD rules pose a significant threat to freelancers, self-employed individuals, and small creative businesses. Here’s what you need to know and how to protect yourself from being trapped in the complexities of MTD.
What Is Making Tax Digital (MTD) for Income Tax?
HMRC is rolling out MTD for Income Tax Self-Assessment (MTD-ITSA), requiring businesses, self-employed individuals, and landlords with an income over £50,000 (from April 2026) and over £30,000 (from April 2027) to:
● Keep digital records of all income and expenses
● Submit tax returns quarterly instead of annually
● Use HMRC-approved software for bookkeeping and submissions
While HMRC claims this will streamline the tax system, it adds an additional layer of complexity and compliance that many small businesses and freelancers are unprepared for.
Why MTD-ITSA is Bad News for Small Businesses
1. Increased Administrative Burden
Currently, self-employed professionals file tax returns once a year, but under MTD, they must file five times a year (four quarterly updates plus an end-of-year submission). This means:
● More paperwork and record-keeping
● Higher costs for accounting software & services
● Less time to focus on business growth and creativity
2. Cost of Compliance is Rising
Small businesses and freelancers will need to subscribe to MTD-compliant software, which could mean:
● Additional costs for bookkeeping software
● Higher accountant fees for quarterly filings
● Potential penalties for non-compliance
For many small creative businesses operating on tight margins, these costs could be devastating.
3. Unfair to Freelancers and the Self-Employed
Freelancers, gig workers, and creatives typically have irregular income streams. Filing quarterly tax returns means paying estimated taxes throughout the year, which could lead to cash flow issues if income fluctuates.
MTD fails to recognize the unpredictable nature of self-employment, forcing freelancers into rigid reporting structures that don’t align with how they earn.
4. Risk of Tax Errors and Penalties
With more frequent reporting, the likelihood of errors and late filings increases, leading to:
● More HMRC investigations into self-employed businesses
● Heavier fines and penalties for mistakes or missed deadlines
Many small businesses don’t have the resources to deal with these frequent tax filings, which could result in accidental non-compliance.
How Jungle Tax Helps You Navigate MTD-ITSA
At Jungle Tax, we specialize in helping freelancers and small businesses stay ahead of HMRC’s ever-changing tax rules. Here’s how we can help:
✅ Automating Your Bookkeeping – We help set up MTD-compliant accounting software so you don’t have to worry about manual record-keeping.
✅ Quarterly Tax Planning – Instead of just filing reports, we strategize ways to lower your tax bill and maximize deductions.
✅ Avoiding Penalties – Our tax experts track deadlines and handle filings to keep you fully compliant.
✅ Providing Personalized Tax Advice – We offer tailored tax strategies for creatives, ensuring you’re not overpaying.
Take Control Before MTD-ITSA Hits
If you’re a freelancer, small business owner, or self-employed professional, MTD-ITSA is a challenge you can’t ignore. Don’t wait until it’s too late—Jungle Tax is here to help you prepare, minimize costs, and ensure smooth compliance.
💡 Book a free consultation today and let Jungle Tax take the stress out of MTD!