Making Tax Digital for Income Tax and freelancers in creative industries
Life as a creative freelancer often means juggling projects, deadlines and clients simultaneously. With Making Tax Digital for Income Tax (MTD IT) becoming mandatory for higher earners from April 2026, many people working in the creative industries will also need to rethink how they keep records and report income.
Across film, TV, music, theatre, gaming, design, marketing, art and writing, creative work is often project-based and varied. MTD IT will not change how much tax you pay, but it will change how you keep records and how often information is sent to HMRC.
This article explains what MTD IT means for people working in the creative industries, who it applies to, how quarterly updates work, and why now is a good time to start preparing.
Who in the creative industries needs to comply, and what is the MTD IT threshold
MTD IT applies to self-employed individuals and those with property income (such as landlords and those who let out a property they own). It is based on their total gross income from these sources.
From April 2026, MTD IT becomes mandatory for anyone with a combined annual gross income of more than £50,000 a year from self-employment and property. HMRC will base this on people’s income in the 2024/5 tax year and is writing to those affected.
This could include people working behind the scenes in film and TV production, such as camera operators, editors, animators, sound technicians and makeup artists. It also includes musicians, actors, performers, theatre professionals, artists, designers, illustrators, consultants, marketing specialists and freelancers working in video games production – to name but a few.
The government has confirmed a phased introduction of MTD IT for other income thresholds:
- from April 2027 for those with a gross income over £30,000
- from April 2028 for those with a gross income over £20,000
This means many creative freelancers who are not affected in 2026 will still need to prepare over the next few years.
Remember to look at your total income
In preparing for MTD IT, a key point for creative freelancers is MTD IT’s focus on your total gross income.
For example, you might earn most of your income from freelance production or consultancy work, but also receive rental income from a property. Even if each income stream feels separate, HMRC adds them together when assessing whether MTD IT applies.
If your annual creative income is £45,000 and you earn £8,000 from property, your total income is £53,000. In that situation, MTD IT would apply from April 2026.
Any PAYE income (ie where you’re employed as an employee) doesn’t count towards MTD IT. So, if you’ve got a part-time employed job on the side, that’s entirely separate from MTD IT’s requirements.
What actually changes under MTD IT?
MTD IT doesn’t change the way your tax is calculated or how much tax you owe. What does change is how your records are kept and how often you need to report information to HMRC.
If you are within scope, you will need to:
- keep digital records of your income and allowable expenses
- submit quarterly updates showing your year-to-date figures via HMRC-recognised software
- complete a final declaration after the end of the tax year, also via HMRC-recognised software
The quarterly updates are not tax returns. They are summaries of income and expenses for the year-to-date, designed to give HMRC a more current picture throughout the year. They also help you estimate your likely final tax bill as the year progresses – which can be useful for budgeting. You don’t, however, pay your tax bill until after the year-end.
Digital record-keeping for creative freelancers
A key part of MTD IT is digital record-keeping. In simple terms, this means keeping your business income and expenses in a digital format and using HMRC-recognised software to submit information.
For creative freelancers, this does not mean changing how you work or recording every receipt in real time. It means keeping clear digital records that can be updated as you go and used to produce quarterly summaries.
Income in the creative industries...
... often comes from a mix of self-employed sources. This might include:
- project or contract fees
- day rates or consultancy income
- royalties or licensing fees
- retainers or performance fees
- one-off commissions from multiple clients across the year
- any other self-employment income received
Expenses for creative freelancers...
...can be just as varied and may change depending on the work you are doing. Typical costs include:
- equipment such as cameras, instruments, software subscriptions or design tools
- travel and accommodation for location work
- studio or workspace costs
- professional subscriptions, union or guild fees
- marketing costs such as websites or portfolios
- and phone or internet costs used for work.
Under MTD IT, your income and expense records must be kept digitally. This does not mean uploading or scanning every receipt for HMRC. Instead, HMRC requires year-to-date totals of your income and expenses to be submitted in quarterly updates.
To produce those totals, you need to keep a digital record of your business income and allowable expenses. Many creative freelancers already do this using spreadsheets or simple bookkeeping tools. The main change under MTD IT is that those digital records must link via MTD IT-recognised software so the quarterly updates can be submitted to HMRC.
Does HMRC offer free MTD IT software?
HMRC does not offer free software for MTD IT, so you will need to select one of its recognised solutions. The best option should suit your current way of working, rather than forcing you into a complicated accounting system. TaxNav is built with simplicity and affordability in mind to support your current approach.
Keeping records little and often makes quarterly updates much easier. Instead of pulling everything together months later, your figures are already organised when each update is due. You can keep records in spreadsheets or use software such as TaxNav’s app, which lets you record income and expenses on the go.
If you use spreadsheets, TaxNav offers a simple bridging option, so you don't need to start over or change your existing approach. You continue working as you do now, while TaxNav handles the MTD IT submissions in the background.
A closer look at quarterly updates and penalties
Quarterly updates are one of the biggest changes under MTD IT, particularly for people used to dealing with tax once a year.
Each update covers a three-month period and reports year-to-date totals. This means your second update includes figures from both the first and second quarters, and so on across the tax year.
Recognising that this is a major change, HMRC has announced a penalty relief for the first year of mandatory MTD IT. In the 2026/27 tax year, late submission penalty points will not be issued for late or incorrect quarterly updates.
This provides creative freelancers with some breathing space while new systems and habits settle in. However, it does not eliminate the need to keep digital records or submit quarterly updates. The final declaration at the end of the tax year remains mandatory and still incurs penalties if missed. Additionally, it cannot be submitted unless the quarterly updates have already been filed.
What is the annual declaration?
The annual declaration replaces the traditional Self Assessment tax return under MTD IT. It is submitted after the end of the tax year and confirms your final income and expense figures, including any adjustments or reliefs to which you are entitled.
Once submitted, it finalises your tax position with HMRC and confirms how much tax you owe. Tax is not paid with the quarterly updates. Any tax due is payable after the annual declaration has been submitted and by 31 January following the end of the tax year.
Be mindful that you must submit your quarterly updates before you can file your annual declaration.
Getting ready for April 2026
Although MTD IT does not become mandatory for the first group until April 2026, now is a sensible time to prepare.
HMRC is running an MTD IT pilot that eligible self-employed people can still join. Participating lets you experience quarterly updates in real conditions before they become mandatory.
You can also start using MTD IT-recognised software ahead of mandation. Practising early helps you understand what information is needed, how often you need to update records, and how quarterly submissions work in practice. Have a look at our YouTube channel to see the simplicity of our software in action.
TaxNav is built for self-employed people, including those with varied creative income and expenses. It supports simple workflows and spreadsheet-friendly ways of working, so you can prepare for MTD IT without overhauling how you run your business.