Making Tax Digital does not usually go wrong because of one dramatic filing error. In practice, the biggest problems tend to start earlier: misunderstanding who is affected, waiting too long to set up software, keeping poor digital records or assuming HMRC’s new process works like the old Self Assessment routine.
For many sole traders and landlords, the safest approach is simple. Check whether the rules apply to you, get your records in order early, use compatible software and make sure your bookkeeping process is consistent before your first updates are due. If you do that, most of the usual making tax digital common mistakes can be avoided.
At Business Help Group UK, we regularly see that MTD preparation is less about technology alone and more about getting the whole compliance process right from the start.
What Making Tax Digital for Income Tax means now
HMRC says that Making Tax Digital for Income Tax is a new way for sole traders and landlords to report income and expenses. Current GOV.UK guidance says that from 6 April 2026 it applies where total annual income from self-employment and property is over £50,000. You can read that in HMRC’s official guidance here: https://www.gov.uk/guidance/tax-agents-handbook/making-tax-digital.
The legal framework has also been brought into effect through the Income Tax (Digital Obligations) Regulations 2026. The Explanatory Memorandum states that this instrument brings MTD obligations for Income Tax into effect from 1 April 2026: https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf.
That mix of dates can confuse taxpayers, so one of the first practical points is this: do not rely on headlines or hearsay. Always check the current HMRC guidance and, where necessary, the underlying legislation.
The most common Making Tax Digital mistakes
1. Assuming MTD does not apply because you only have one small business or one rental property
A common misunderstanding is that MTD is only a concern for larger businesses or more complex landlords. That is not what the current guidance says. HMRC’s guidance refers to total annual income from self-employment and property, not whether your affairs feel simple.
If you are a sole trader, a landlord or both, you should review your position properly rather than make assumptions. A straightforward business can still fall within the regime if the income threshold is met. Leaving that check too late is one of the most expensive mistakes because it can affect software setup, bookkeeping routines and agent authorisation.
How to avoid it
- Review all relevant self-employment and property income together
- Check current HMRC guidance rather than relying on old articles or social media posts
- Get advice early if you have mixed income sources or are near the threshold
2. Confusing announced changes with rules already in force
MTD commentary often mixes law, guidance and future policy announcements together. That creates real confusion.
For example, the 2026 Budget document says the government will defer the roll-out of MTD for Income Tax to several taxpayer groups until further notice. It also says taxpayers joining in April 2027 will not receive penalty points for late submission of their first four quarterly updates for 2027-28: https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html.
That is important, but it should be treated as an announcement unless and until implemented in law or reflected in binding current rules. By contrast, HMRC’s current agent toolkit states that legislation introduced in the Autumn Budget 2025 means HMRC will not apply penalty points for late quarterly updates for the first tax year, 2026 to 2027: https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax.
The lesson is clear. Some MTD statements describe what applies now. Others describe what the government intends to do. They are not the same thing.
How to avoid it
- Check whether a point is enacted law, current HMRC guidance or a Budget announcement
- Do not build your compliance process around proposals alone
- Ask your accountant to separate what applies now from what may change later
3. Leaving software decisions until the last minute
Many businesses think MTD starts when they submit something. In reality, the hard part often starts much earlier with record-keeping systems. If you delay choosing suitable software or digital processes, you create avoidable pressure around setup, training and record accuracy.
HMRC’s first-time guidance for MTD for Income Tax is useful because it points taxpayers towards the practical steps involved in getting started: https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/using-making-tax-digital-for-income-tax-for-the-first-time.
This is particularly important for people who currently use spreadsheets, paper files or bank statements as their main bookkeeping method. A late switch can lead to duplicate records, missing categories and rushed submissions.
How to avoid it
- Choose your software well before your first mandated period
- Make sure your digital records process fits how your business actually operates
- Test bank feeds, expense capture and reporting workflows early
- Give yourself time to learn the system before live reporting begins
4. Treating digital records as a year-end tidy-up exercise
One of the most common making tax digital common mistakes is trying to recreate records after the event. MTD works best when records are kept consistently throughout the year. If income and expenses are entered months later from memory or from a bag of receipts, errors become far more likely.
Late bookkeeping also makes quarterly updates more stressful than they need to be. Even where a temporary penalty easement applies, poor habits can still create inaccurate submissions, management confusion and extra accountancy costs.
How to avoid it
- Set a weekly or monthly bookkeeping routine
- Store purchase evidence and income records digitally as you go
- Reconcile transactions regularly instead of waiting until quarter end or year end
- Use accountant reviews to spot coding issues early
5. Assuming the penalty easement means deadlines do not matter
HMRC’s agent toolkit says penalty points will not be applied for late quarterly updates in the first tax year, 2026 to 2027: https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax.
That should not be misunderstood as a free pass to ignore MTD obligations. An easement on penalty points for specific late quarterly updates is not the same as saying compliance no longer matters. Deadlines, digital record-keeping and overall filing responsibilities still need to be managed properly.
Businesses that use the first year as an excuse to stay disorganised often find themselves in a worse position once the soft landing period ends.
How to avoid it
- Treat the first year as a live practice run for long-term compliance
- Build calendar reminders and internal deadlines
- Use the easement to refine your process, not postpone it
6. Not checking whether you may fall within a deferred or exempt group
Another mistake is assuming everyone will enter MTD for Income Tax on the same basis. The position is more nuanced.
The Budget 2026 document says the government will defer the roll-out to several taxpayer groups until further notice: https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html. The Budget 2026 overview of tax legislation and rates also says the government will exempt certain groups until further notice, including those eligible for qualifying care relief, non-UK resident foreign entertainers and sportspeople and expected non-resident customers: https://www.gov.uk/government/publications/budget-2026-overview-of-tax-legislation-and-rates-ootlar/budget-2026-overview-of-tax-legislation-and-rates-ootlar?trk=article-ssr-frontend-pulse_little-text-block.
These points matter, but again they should be read carefully as policy announcements unless and until fully implemented. For affected taxpayers, the safest route is to get tailored advice before assuming they are in or out.
How to avoid it
- Check whether any announced deferral or exemption may be relevant to your circumstances
- Do not self-assess complex exemption issues without advice
- Keep watching for updated HMRC guidance and legislation
7. Forgetting that landlords and sole traders may need different practical workflows
MTD for Income Tax is often discussed as though every taxpayer keeps records in the same way. In reality, a landlord with irregular repair costs and letting statements may need a different process from a sole trader raising invoices every week.
The mistake is not in having a simple process. It is in having the wrong simple process. A one-size-fits-all setup can create coding problems, omitted transactions or confusion between business and private items.
How to avoid it
- Set up your chart of accounts and record categories around your actual income sources
- Separate business and personal transactions as far as possible
- Use a process designed for rental income, self-employment income or both where relevant
8. Trying to manage everything alone when the records are already messy
There is nothing wrong with straightforward DIY bookkeeping where records are clean and the process is under control. The real issue is when taxpayers already know there are gaps, duplicate entries or uncertainty over how to categorise transactions but press on without support.
MTD tends to expose existing bookkeeping weaknesses rather than create them. If your records are already inconsistent, digital filing on top of that will not solve the underlying problem.
How to avoid it
- Get a bookkeeping health check before your first MTD period if your records are behind
- Ask for help setting up opening balances and correct categories
- Use professional support where there are multiple income streams or legacy errors
A practical checklist to prepare for MTD properly
If you want to avoid the most common errors, focus on these practical steps now:
- Confirm whether MTD for Income Tax applies to you based on current official guidance
- Check your timing carefully and distinguish law already in force from future announcements
- Choose compatible software early and make sure it suits your type of business or property income
- Move to regular digital bookkeeping instead of year-end reconstruction
- Create a clear filing calendar for updates, reviews and supporting admin
- Review special cases if you may fall into a deferred or exempt category
- Get advice early if your records are incomplete or your position is unclear
Why early advice matters
Most MTD problems are cheaper to prevent than to fix. A short review before you start can identify whether your software, records and reporting process are fit for purpose. It can also help you avoid relying on outdated online commentary or misunderstanding a Budget announcement.
For sole traders and landlords especially, the transition is easier when it is planned around ordinary bookkeeping routines rather than left until a compliance deadline is close.
Frequently asked questions
When does MTD for Income Tax start?
HMRC’s current guidance says that from 6 April 2026, MTD for Income Tax applies where total annual income from self-employment and property is over £50,000: https://www.gov.uk/guidance/tax-agents-handbook/making-tax-digital. The related 2026 regulations and explanatory material bring the obligations into effect from 1 April 2026: https://www.legislation.gov.uk/uksi/2026/336/pdfs/uksiem_20260336_en_001.pdf. If timing is critical in your case, take advice on how the rules apply to your circumstances.
Will I get penalty points if I am late in the first year?
HMRC’s current agent toolkit says penalty points will not be applied for late quarterly updates for the first tax year, 2026 to 2027: https://www.gov.uk/guidance/get-ready-for-mtd-an-agent-toolkit/understanding-making-tax-digital-for-income-tax. That should not be read as meaning deadlines no longer matter or that all penalties are switched off. The detail can depend on the obligation in question.
Do Budget announcements about deferrals and exemptions apply automatically?
Not necessarily. Budget documents are important, but they may describe announced policy rather than fully enacted law. For example, the Budget 2026 document says roll-out for several taxpayer groups will be deferred until further notice: https://www.gov.uk/government/publications/budget-2026-document/budget-2026-html. If you think a special category may apply to you, it is sensible to check the latest guidance and take advice before relying on it.
Can I keep using my current bookkeeping method?
Possibly, but only if it supports compliant digital record-keeping and reporting. If your current system depends on paper notes, scattered spreadsheets or reconstructing figures at year end, it may not be suitable. The best setup is one you can maintain consistently throughout the year.
Final thought
The biggest making tax digital common mistakes are usually avoidable. Most come down to poor preparation, unclear records and confusion about what the rules actually say. If you sort those issues early, MTD becomes much more manageable.
If you are a sole trader, landlord or business owner and want clear help preparing for MTD for Income Tax, Business Help Group UK can support you with practical accountancy guidance, software setup and ongoing compliance support tailored to your circumstances. Get in touch with Business Help Group UK to discuss the next steps before avoidable problems become expensive ones.
