Making Tax Digital (MTD) for Healthcare Professionals
What is MTD for Healthcare Professionals?
HMRC continue to digitalise the UK Tax System.
Digital means on a computer / tablet / mobile phone !
We support FreeAgent for MTD and Self Assessment tax returns.
MTD changes how many Self Employed people maintain their accounting and bookkeeping records, and how these records are sent to HMRC.
MTD will be phased in for Self Employed people (Income Tax only) from April 2026.
You will be required to submit summary Quarterly Updates of your business transactions to HMRC.
These new requirements are nothing to do with VAT which is completely separate.
MTD – who is in – who is not in – yet!
MTD will apply to individuals who carry on a service or trade ie. self-employed / sole traders.
MTD will not apply to partnerships at this stage.
No date has yet been set for MTD for limited companies.
When does MTD Start?
- from 6th April 2026, where 2024/25 total turnover/fees exceeded £50,000
- from 6th April 2027, where 2024/25 total turnover/fees exceeded £30,000
- from 6th April 2028, where 2024/25 total turnover/fees exceeded £20,000
- The tax return for 2024/25 will be used to decide if compliance is required from 6th April 2026, 6th April 2027 or 6th April 2028.
- Subsequent tax years’ turnover/fees will also be assessed to determine whether MTD is to start
HMRC will determine your start date by reviewing your Self Assessment 2024/25, and send you a letter.
Wording of Healthcare Associate Contracts
For Associate healthcare professionals, there is a further consideration.
Some Associates’ contracts are worded so that the total patient fees are due to the Associate, but then a rent and / or service charge for the clinic services is deducted before the Associate is paid. With such a contract, it is the total patient fees which determines the turnover for the start date, ie. 2026, 2027 or 2028, not what the Associate eventually receives net of the rent and / or service charge.
Some Associates’ contracts are a simple commission basis, in which case the total commission received in a tax year is the turnover for the MTD registration.
What are the MTD requirements?
Self employed people will be required to
- Record business transactions (eg. income and expenses) digitally, using a software product or spreadsheet. Paper and cash book bookkeeping will no longer be legal!
- Submit quarterly returns to HMRC directly from the digital records.
- Finalise the Self Assessment tax position after the end of the tax year, as in the past and currently, and before the next 31st January.
- The MTD Quarterly Updates to HMRC should be submitted using compatible software that can communicate with HMRC’s computer.
Quarterly Updates
Quarterly Updates contain a summary of business transactions.
Your Self Assessment – year end Tax Return – is also required by 31st January following the previous 5th April as usual and currently.
Please note critically, MTD means an uninterrupted digital record flow from the software to HMRC submission.
You will not be able to keep your own designed spreadsheet and hand-key your MTD return to an HMRC online app, because there won’t be one.
We only support FreeAgent
When are the returns due?
The quarters and deadlines for submitting MTD returns are:
- 6th April to 5th July: 7th August
- 6th July to 5th October: 7th November
- 6th October to 5th January: 7th February
- 6th January to 5th April: 7th May
What does it all mean in practical terms for healthcare professionals?
- Neither cash book, nor paper records, will be possible.
- Self designed spreadsheets will need bridging software, we do not support this.
- Check contracts for correct calculation of total fees (see above).
- Keep digital records on HMRC approved software – we recommend and support FreeAgent
- Keep digital records up to date.
- The tax year is fixed at 6th April to the following 5th April (reference “Basis Period Reform”).
- A separate business bank account is strongly recommended – which may be advantageous to directly feed your business transactions into the online software which will probably save you some bookkeeping time.
- There will be an initial steep learning curve when getting used to the new software, and errors may be inevitable.
- MTD may be the trigger point for healthcare professionals appointing an accountant to support the software / recording / MTD returns and advise on Income Tax.
- Extra accounting and software costs may mean you increasing your client fees to cover your extra costs.
Recommended Software
We will only support FreeAgent because of
- Friendliness of screens
- Very fast screen build time
- Simplicity of reports
- Excellent support staff based in Edinburgh
- Free if used with a Mettle bank account (which is also free)
It may be better to start MTD in 2025/26, from 6th April 2026, (even if not yet required by HMRC) to get used to the new software in a less time-pressured way, before accuracy becomes more relevant.
Business Bank Account
A separate business bank account is recommended if you are going to use approved online accounting software, eg. FreeAgent.
This is because FreeAgent will automatically connect to your business bank account and upload all the bank transactions to FreeAgent, saving you laborious bookkeeping time.
If you connected the online software/app to a private bank account, your private transactions would also be uploaded to the software/app, and therefore clutter the business bookkeeping and create more work sorting it out.
The good news is that a Mettle bank account is free in conjunction with you using FreeAgent, which is also free.
Accounting Fees
- Already using online accounting software
- IT literate – eg. comfortable with spreadsheets
- Only keeping pen and paper records
It may not be possible to charge the same fee for each of these categories, especially in the first year.
Our 2026/27 fees for a Self Employed practitioner, not under MTD, are £45 per month, payable concurrent with the tax year, so from April 2026 to March 2027. This fee covers on-going support and general Q&A throughout the year (not related to MTD) and the calculation of your tax year Income Tax and National Insurance payable, and submission of your Self Assessment to HMRC, with your approval.
Please note, we will only use FreeAgent.
Our monthly fees (which include the above £45) to support an MTD client for 2026/27 are::
- Already using FreeAgent: £60 per month – allows for around an extra 30 minutes support per quarter
- IT literate (but no experience of online accounting software): £75 per month – allows for around an extra 1 hour support per quarter. This may be reduced in subsequent years.
- Previously pen and paper: £100 per month – allows for around 2 hours extra support per quarter. This may be reduced in subsequent years.
Additionally, there will be an initial set up fee, up to £200, which will not be applicable to a client already on FreeAgent.
Switch to Limited Company?
Would it be beneficial to practice / trade through a limited company to avoid MTD? That’s your choice, limited companies have significantly more bookkeeping and tax complexities, and company law requires bookkeeping to be up to date all the time. Accounting fees for limited companies could be double or treble that for self employed / sole traders.
We would not recommend to a client to change to a limited company just to avoid MTD.
What does MTD not mean?
The due dates for paying tax will not change under MTD, at this time.
Please also read our Payments On Account page.
Exceptions
Some people may be able to obtain an exemption:
https://www.gov.uk/guidance/apply-for-an-exemption-from-making-tax-digital-for-income-tax
HMRC guidance on “Assisted digital and digitally excluded support needs”
https://www.gov.uk/government/publications/assisted-digital-and-digitally-excluded-support-needs
