Are you in? It’s your takings, not your profit
Add up everything clients paid you as a sole trader in the 2025/26 tax year – day rates, project fees, retainers, coaching sessions and packages, workshop and speaking fees, online course sales and any expenses you rebilled to clients – before taking off costs. Salary from an employer or umbrella company does not count, and nor does anything you earn through your own limited company. If the total (plus any rent from property you let) is over £30,000, MTD applies from 6 April 2027. Over £50,000 and you have been in since April 2026.
Over £50,000
Over £30,000
Over £20,000
planned
Your work in accountant language
What actually happens in your working life, what your accountant and HMRC call it, and what to do about it.
| What happens | Accountant calls it | What you do |
|---|---|---|
| A client pays your monthly invoice for 12 days’ work | Turnover – recorded when paid (cash basis) | Record the amount when it lands, not when you invoice. |
| You rebill a client for your train fares to their office | Turnover (recharged expenses) + an expense | Record the fares as an expense and the amount you recover as income. |
| A coaching client pays for a six-session package upfront | Turnover | Record the whole payment when you receive it. |
| You travel to a client for a three-month project | Travel to a temporary workplace – allowable | Log mileage or keep fares; if the same site becomes regular long-term, the rules can change. |
| You pay for professional body membership and indemnity insurance | Allowable expense | Keep the renewal invoices. |
| You take a client to lunch to talk about a new project | Client entertaining – not allowable | You can record it in your books, but it doesn’t reduce your tax. |
| You move money to your personal account | Drawings – not an expense | Fine to do, but it does not reduce your tax. |
| Every three months | Quarterly update | Your software sends HMRC your income and expense totals. |
| After 5 April | Final declaration | Confirm the year’s figures; tax is worked out and due by 31 January. |
What can a consultant claim?
✓ Usually allowable
- Travel to clients for temporary projects: mileage, fares, hotels and subsistence while away
- Professional indemnity and public liability insurance
- Professional body subscriptions relevant to your work
- Laptop, phone and software (business share)
- Video call, scheduling and coaching platform subscriptions
- Courses and CPD that keep existing skills up to date
- Website, LinkedIn premium and marketing costs
- Room hire for workshops and coaching sessions
- Home office – the flat rate or a fair share of bills
- Accountancy fees and bookkeeping software
✗ Not allowable
- Client lunches, dinners and hospitality
- Daily travel to a client site that has become your regular workplace
- Business suits and everyday work clothes
- A qualification to move into a completely new field
- Money you take out for yourself (drawings)
Rules that matter for consultants
Rebilled expenses count in turnover
If you pay for travel or materials and then charge them on to the client, the recharge is income and the cost is an expense. Your profit is the same, but your turnover – which decides MTD – goes up.
Limited companies and umbrellas
If you work through your own limited company, the company is outside MTD for Income Tax. If you are paid through an umbrella company, you are an employee and that pay does not count. Only income you invoice personally as a sole trader counts.
Long projects and travel
Travel to a temporary workplace is usually allowable. If you expect to spend more than 24 months at one client site, or it becomes the place you work every day, it may start to count as a regular workplace and the travel stops being claimable.
Employment status
Long interim roles where the client controls how, when and where you work can look like employment. HMRC’s Check employment status for tax tool can help you check where you stand.
Worked example
Sarah, a freelance HR consultant and coach in Reading (illustrative example)
| Takings (turnover) | £47,500 |
| less Travel to client sites (including rebilled fares) | −£3,800 |
| less Insurance and professional membership | −£1,150 |
| less Laptop, phone and software | −£1,600 |
| less Coaching platform and video call subscriptions | −£540 |
| less CPD and training | −£900 |
| less Website and marketing | −£750 |
| Profit | £38,760 |
| Income tax (estimate) | £5,238 |
| Class 4 National Insurance (estimate) | £1,571 |
| Total tax for the year | £6,809 |
| Put aside each month | £567 |
Estimate for 2026/27 using England, Wales & NI rates, assuming no other income. Scotland has different income tax bands.
What a quarterly update looks like
A typical quarter for a consultant: match each client payment to its invoice, check rebilled expenses appear both as income and as costs, add travel logs and subscription receipts, and flag anything that was client entertaining. Then submit from your software, or let your accountant do it. With few but large transactions, it can take as little as 20 minutes.
| Quarter | Period | Submit by |
|---|---|---|
| Q1 | 6 Apr – 5 Jul | 7 Aug |
| Q2 | 6 Jul – 5 Oct | 7 Nov |
| Q3 | 6 Oct – 5 Jan | 7 Feb |
| Q4 | 6 Jan – 5 Apr | 7 May |
| Final declaration | The whole tax year | 31 Jan following |
Quarterly updates are summaries – they don’t change when you pay. Tax is still due by 31 January (plus payments on account on 31 January and 31 July if they apply to you).
What will an accountant cost?
Typical monthly fees under MTD for Income Tax for: Sole trader, one business.
| Option | What you get | Per month |
|---|---|---|
| You do it yourself | MTD-compatible software. You keep the records and send the updates. | £0–£15up to £180 a year |
| Accountant files for you | You keep records in an app; they check them, send the 4 quarterly updates and the final declaration. | £30–£60about £360–£720 a year |
| Full service | They do the bookkeeping too – you share receipts and bank feeds, they handle the rest. | £60–£120about £720–£1,440 a year |
What pushes the price up: lots of transactions every month, or more than one income stream; records kept on paper rather than in an app; being VAT-registered; catching up on missed updates or late returns.
What a fixed-fee quote should include
- All 4 quarterly updates and the final declaration (your tax return)
- The MTD software licence – or whether you pay for it separately
- Whether they do the bookkeeping or only check what you’ve recorded
- A reminder before each deadline and an estimate of the tax to put aside
- Whether VAT (20%) is added on top – not every practice charges it
Accountancy fees for your business are an allowable expense, so they reduce your tax bill.
Indicative ranges from published UK price lists, checked October 2026. Not a quote – your fee depends on how many transactions you have, how tidy your records are and where you live.
Questions consultants ask
I work through my own limited company. Does MTD for Income Tax apply?
Not to the company. Limited companies are outside MTD for Income Tax. You might still be in personally if you have other self-employment or property income over the threshold.
Do expenses I rebill to clients count towards the threshold?
Yes. The amount you recharge is part of your turnover. The original cost is your expense.
Can I claim lunch with a client?
No. Client entertaining is not an allowable expense for tax, even if it helps win work.
I sell an online coaching course as well. Does that count?
Yes. Course and digital product sales are part of your self-employed income. Record the full sale price and any platform fees as an expense.
Sources
- Find out if and when you need to use Making Tax Digital for Income Tax – GOV.UK
- Work out your qualifying income for Making Tax Digital for Income Tax – GOV.UK
- Send quarterly updates using Making Tax Digital for Income Tax – GOV.UK
- Find software that works with Making Tax Digital for Income Tax – GOV.UK
- Penalties for Making Tax Digital for Income Tax – GOV.UK
This guide is general information about HMRC’s Making Tax Digital rules as of 26 October 2026, not tax advice. MTD Match is an independent introduction service and is not affiliated with HMRC. Check gov.uk or speak to an accountant about your own situation.