Most trouble with Making Tax Digital comes from a handful of misunderstandings rather than from anything genuinely difficult. Here are the ones that cause real problems.
1. Thinking quarterly updates are quarterly tax bills
They are not. A quarterly update is an unadjusted summary of income and expenses. Your tax is still settled at the Final Declaration, and your payment dates are still 31 January and 31 July.
Any estimate you see alongside a quarterly update is exactly that — it has no allowances, no reliefs, and none of your other income in it.
2. Testing the threshold on profit instead of turnover
Qualifying income is gross income from self-employment and property, before expenses. A business turning over £70,000 with £40,000 of costs is in from April 2026, not out because the profit is £30,000.
3. Forgetting that income sources add together
Sole-trade income and property income are combined for the threshold test. £20,000 of rent plus £15,000 of freelance work is £35,000 of qualifying income — inside the April 2027 threshold, even though neither source crosses it alone.
4. Breaking the digital link with one retyped number
You can keep immaculate digital records all year and still breach the rules by reading a total off one screen and typing it into another at quarter end. Once data is in your digital records it has to travel to HMRC without manual re-entry — via API, CSV import, or a linked formula.
This is the most common technical breach, and it is always well-intentioned.
5. Putting mortgage interest in as a property expense
For residential property, finance costs are not deducted from rental income. They are relieved as a 20% tax reduction at the Final Declaration. Landlords who treat interest as an expense get quarterly figures that are materially wrong all year.
6. Expecting the quarterly figures to be a complete financial picture
Bank interest, employment income, dividends and pensions are not in quarterly updates at all. If those are a meaningful part of your income, your quarterly totals will look nothing like your eventual tax position, and that is by design.
7. Leaving the records until the deadline
Under Self Assessment you could do a year’s bookkeeping in January. Under MTD you have five weeks after each quarter ends — 7 August, 7 November, 7 February and 7 May.
Five weeks is enough time if your records are roughly current, and not nearly enough if they are not. The habit change is the hard part of MTD, not the filing.
8. Assuming record-keeping software files for you
Software that keeps your records and software that submits to HMRC are not always the same thing. Before your start date, be clear about which product performs the submission and whether the data gets there by a digital link.
If you are already mandated, check this now rather than on 7 August. The obligation to submit sits with you.
Late updates and penalties
Late submissions attract points rather than an immediate fine. You accrue a point per missed deadline, and once you reach the threshold for your filing frequency a £200 penalty applies, with further £200 penalties for each subsequent miss until the points expire.
Late payment penalties are separate, and are charged as a percentage based on how overdue the payment is. Points and payment penalties are two different systems. HMRC sets out how the points system works in GOV.UK: penalties for Making Tax Digital for Income Tax.
Where TaxSwipe fits
TaxSwipe imports your bank statements and turns them into categorised digital records with a swipe, then works out your cumulative quarterly totals. It is built to make the record-keeping habit cheap enough that the five-week deadline is not a scramble.
Keep me posted
Plain-English updates on Making Tax Digital, and a note when TaxSwipe gains new features. No more than a couple of emails a month.
We store your address to send you these updates and nothing else. We never sell it or pass it on. See our Privacy Policy for how we handle your data and how to ask us to delete it.