Making Tax Digital (MTD) for Income Tax is one of those things lots of self-employed people know they should understand, but many aren’t quite sure where they stand and that’s where MTD mistakes can easily happen.
And they’re not alone. Research commissioned by !Coconut found that:
- 42% of self-employed people don’t understand what MTD for Income Tax requires of them
- 37% aren’t clear on the income threshold, which can lead to MTD mistakes
- 35% don’t have HMRC-compliant software and don’t plan to get it
With MTD for Income Tax being introduced in stages, that uncertainty could easily turn into missed deadlines or last-minute stress.
From April 2026, MTD for Income Tax will apply to self-employed people and landlords with qualifying income over £50,000. From April 2027, this will expand to those earning over £30,000.
If you’re close to either threshold, or expect your income to grow, getting prepared early can make a big difference. Below are some of the most common MTD mistakes and how !Coconut helps you avoid them.
Mistake 1: Not knowing whether MTD for Income Tax applies to you
One of the biggest challenges is simply understanding if and when MTD for Income Tax affects you. Many people assume it’s something to worry about later, only to find it applies sooner than expected, often because they didn’t realise what counts as qualifying income for MTD.
Qualifying income generally includes gross income from self-employment and property before expenses, which can catch people out if they only focus on profit.
How !Coconut helps
!Coconut is designed specifically for self-employed people, with MTD for Income Tax requirements built in. Whether it applies to you now or in the future, your records are already set up in a way that keeps you on track as the rules change.
Mistake 2: Relying on spreadsheets or manual processes
Spreadsheets might feel familiar, but on their own they don’t meet HM Revenue & Customs MTD for Income Tax requirements. HMRC expects digital record-keeping with digital links all the way through to submission, so manual copying doesn’t count.
How !Coconut helps
!Coconut is HMRC-recognised software that connects directly to HMRC. Your income and expenses stay digital from start to finish, without risky workarounds or extra admin.
Mistake 3: Leaving everything until the end of the quarter
Quarterly updates are a big shift for many self-employed people. Leaving records until just before a deadline makes it far easier to miss expenses or submit incorrect figures for MTD for Income Tax.
How !Coconut helps
!Coconut tracks income and expenses automatically from your business bank account, in real time. Your records stay up to date throughout the year, making quarterly updates far easier to handle.
Mistake 4: Incomplete or inaccurate records
Missing receipts, uncategorised transactions or trying to remember details months later can all lead to errors and potentially paying the wrong amount of tax under MTD for Income Tax.
How !Coconut helps
Transactions are clearly categorised and receipts can be attached as you go. Everything is stored in one place, so your records are accurate and easy to review.
Mistake 5: Being surprised by your tax bill
Not knowing how much tax you owe until the bill arrives makes budgeting difficult, especially with more frequent reporting under MTD for Income Tax.
How !Coconut helps
!Coconut gives you a clear, running estimate of your tax bill based on your real income and expenses. You can see where you stand at any time, helping you plan ahead rather than react later.
Staying MTD-ready without the stress
Making Tax Digital for Income Tax doesn’t have to be complicated and most MTD mistakes are easy to avoid with the right setup. Most problems come from unclear rules around qualifying income for MTD, manual processes and leaving things too late.
!Coconut helps you:
• Keep digital records in line with HMRC’s MTD for Income Tax requirements
• Stay organised throughout the year
• Submit information with confidence
• Avoid common MTD mistakes before they become an issue
MTD for Income Tax is changing how self-employed people report income to HMRC. With !Coconut, you don’t need to become an expert, you just need software that’s built to keep you compliant, quietly in the background.
Start your 14-day free trial here.
