MTD for Freelancers: What You Need to Know

Freelancing offers flexibility and independence, but MTD adds a new layer of admin. The good news is that with the right software and habits, staying MTD-compliant as a freelancer takes less time than you might think.

Does MTD Apply to You?

If your gross freelance income exceeds £50,000 (from April 2026) or £30,000 (from April 2027), yes. Remember, this is your total invoiced amount before expenses — not your take-home pay.

If you also earn rental income, that is added to your freelance income for the threshold calculation.

Freelancer-Specific Challenges

Variable income. Unlike a shop owner with steady daily sales, your income may vary wildly from month to month. One quarter you might invoice £20,000; the next, £5,000. MTD quarterly updates reflect this reality — they are simply what happened in each period.

Multiple clients. You may invoice a dozen different clients per quarter. Each payment needs to be recorded as income, ideally tagged with the client name for your own records.

Mixed personal and business spending. Freelancers often use the same phone, computer, and internet connection for both work and personal use. You need to apportion these costs correctly.

Irregular expenses. Project-based work means expenses come in bursts — equipment for a specific project, travel to a client site, software subscriptions.

Setting Up for Success

Separate bank account. If you do not already have a dedicated business bank account, get one. This makes MTD infinitely easier.

Connect bank feeds. Automatic transaction import from your business account captures every client payment and business expense. Accounted connects to all major UK banks.

Invoice through your software. If your MTD software has invoicing, use it. This links your invoices directly to your income records, making everything consistent.

Set aside tax money. With quarterly tax estimates from your software, you can set aside the right amount each month. The common rule of thumb is 30% of profit, but your software can give you a more accurate figure.

Expenses Freelancers Commonly Claim

• Home office costs (simplified or actual)
• Computer, phone, and software
• Professional development and training
• Travel to client sites
• Professional indemnity insurance
• Accountancy fees
• Marketing and website costs
• Stationery and office supplies
• Professional memberships and subscriptions

Tips for Freelancers

• Categorise transactions weekly — it takes 10 minutes and prevents quarter-end chaos
• Photograph receipts immediately using WhatsApp or your phone
• Track your working-from-home days for home office claims
• Review your tax estimate monthly to avoid surprises
• Submit quarterly updates as soon as the quarter ends

Penny, our AI bookkeeper, categorises your expenses automatically and flags anything that looks wrong. Try it free for 14 days.