A working life example: MTD for freelancers and consultants
Meet Luca, a freelance design consultant based in Manchester. He works with a handful of clients at any one time, charging by the day or by the project. Some months are packed with work. Others are quieter, filled with planning, pitching and binge-watching all past seasons of The Traitors.
This kind of setup is common for freelancers and consultants. Income is often tied to time or projects, rather than products sold. Payments don’t always arrive regularly, and while expenses can be lighter than in other trades, they’re still essential – things like software subscriptions, equipment and travel.
This way of working doesn’t change under Making Tax Digital (MTD). But the way Luca keeps track of it does.
What stays the same under MTD
MTD doesn’t change how Luca works or earns money.
He’s still:
Juggling projects and deadlines
Sending invoices and chasing payments
Having busy months and quieter ones
Paying for equipment that helps him do his job
In short: the work stays the same. What changes is how information about his self-employed work is recorded and shared with HMRC.
What changes under MTD
Keeping digital records (and what that actually means)
Under MTD for Income Tax, Luca needs to keep digital records of his self-employed income and expenses.
That means:
Keeping a record of what he’s been paid
Keeping a record of his work-related expenses
And storing that information in HMRC-recognised software (rather than just paper, spreadsheets saved on his laptop, or a folder full of receipts)
A digital record doesn’t have to be complicated. It’s simply a log showing:
Income: payments from clients
Expenses: costs related to his work, like software, equipment and travel. And, if he works from home, a share of household costs like heating and electricity that he can claim for work purposes. HMRC has written this guidance on what home-working costs you can and can’t claim, which is worth checking out if you work from home regularly.
Quarterly updates to HMRC
Instead of sending everything to HMRC once a year, MTD involves sending quarterly updates.
Each update is a simple summary of:
Total self-employed income for that quarter
Total allowable expenses for that quarter
These updates:
Only focus on Luca’s self-employed work
Don’t include things like savings interest or other personal income
Aren’t tax bills
Don’t need every allowance worked out yet
They’re snapshots that build up over the year, giving a clearer picture of how things are going, which is especially useful when income goes up and down from quarter to quarter.
At the end of the tax year
Once the tax year finishes, Luca submits his tax return.
This is when he:
Checks everything from the year
Adds any other income outside his freelance work
Claims allowances and reliefs
Finalises his tax position with HMRC
So while information is sent during the year, there’s still a clear end-of-year moment where everything’s reviewed and wrapped up.
What this looks like in real life
For Luca, MTD doesn’t change how he works. He’s still juggling projects, tracking time, sending invoices, and replying to emails that start with “Sorry for the delay”.
What changes is how the numbers are handled in the background:
Records build up digitally as the year goes on
Updates go to HMRC every quarter, not just once a year
There’s less pressure to remember everything at the end of the tax year
How this could work with Monzo
If Luca uses a Monzo business bank account, much of his income and expenses will already flow through one place.
That means:
Payments from clients are visible digitally
Work-related spending is easy to keep track of
Monzo’s built-in MTD software – which is free to use and HMRC recognised – will then use that information to send the required quarterly updates and support the end-of-year tax return.
You can file tax straight from Monzo to HMRC, ready for HMRC’s new rules coming in April 2026. Apply for a free business bank account to get on the waitlist.
Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.
We can’t give tax or financial advice – you’ll need to speak to a professional adviser for that. But if you’d like to understand more about MTD, including who it applies to and when, you can read more in this article.