Making Tax Digital for counsellors: what changes and when

If you are a self-employed counsellor, the way you report your income to HMRC is about to change, and it is worth understanding before it lands on you. Making Tax Digital (MTD) for Income Tax becomes mandatory from 6 April 2026 if your gross self-employment and property income is over £50,000, from April 2027 if it is over £30,000, and from April 2028 if it is over £20,000. The tax you pay does not change. How and how often you report it does.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax replaces the single annual Self Assessment return with digital record keeping and quarterly updates sent to HMRC through compatible software. It applies to sole traders and landlords, which includes most counsellors in private practice. Your tax bill and payment dates stay the same. Only the reporting routine changes.

In practice, that means three things. You keep your practice records digitally (no more shoebox of receipts totted up each January). You send HMRC a summary of income and expenses every three months. And you still finalise everything once a year, with tax due by 31 January as now. Full guidance is at gov.uk.

When do counsellors have to start?

You must start from 6 April 2026 if your qualifying income on your 2024 to 2025 tax return was over £50,000. The threshold drops to £30,000 from April 2027 (based on your 2025 to 2026 return) and £20,000 from April 2028. HMRC checks your return and writes to tell you.

The important word is qualifying income. It means your gross income from self-employment and property combined, before you deduct a penny of expenses. A counsellor charging £60 a session for 20 sessions a week, 46 weeks a year, turns over about £55,200 and would be in the first wave even if room hire and supervision eat a third of it. If you also rent out a property, that rental income counts towards the same total.

What will you actually have to do each quarter?

Each quarter you send HMRC a running total of your practice income and expenses through MTD-compatible software. The deadlines are 7 August, 7 November, 7 February and 7 May. Updates are cumulative, so mistakes in one quarter are simply corrected in the next. A final declaration then wraps up the year.

The quarterly updates are not four tax returns and not four tax bills. They are summaries, and because each one covers the year so far, an error in July does not follow you around (see the gov.uk quarterly updates guidance). If you already track sessions and expenses in a spreadsheet or an app, you are most of the way there. If your bookkeeping is still paper and memory, this is the year to fix that. Our bookkeeping basics guide covers the practical setup.

What software do you need, and is there a free option?

You need software that keeps digital records, sends quarterly updates and submits your tax return. HMRC does not provide its own, but its official finder lists compatible products, including free versions suitable for a simple sole-trader practice.

For most counsellors, with one income stream and predictable expenses, the free and low-cost options will do the job. Some products also work as bridging software, connecting a spreadsheet you already use to HMRC. Whatever you pick, choose it well before your start date so the first quarter is not also your learning quarter.

What happens if you miss a deadline?

HMRC uses a points system. Each missed submission deadline earns one point, and at four points you get a £200 penalty, then £200 for each further miss. Late payment of tax costs 3% of what you owe at day 15 and day 30 in 2026 to 2027, rising to 4% afterwards.

There is some softness built in. Points expire after 24 months if you stay under the threshold, and HMRC has confirmed penalty points will not apply to missed quarterly updates in the first year (2026 to 2027). On top of the fixed percentages, unpaid tax accrues 10% per year from day 31. Details are on the gov.uk penalties page.

Who is exempt from Making Tax Digital?

You are automatically exempt if your qualifying income is £20,000 or less, and in certain other cases, such as having a power of attorney in place. You can apply for exemption if you are digitally excluded, meaning age, disability, location or religious belief genuinely prevents you using digital tools.

Note what does not count: preferring paper returns, disliking software or the hassle of switching will all be rejected. The exemption criteria are on gov.uk and you apply through Self Assessment general enquiries. HMRC aims to reply within 28 days, and you have 30 days to appeal a refusal.

What should you do now?

Check your gross income on your last tax return, not your profit. Over £50,000 and MTD starts for you in April 2026. Under it, you have longer, but the £30,000 and £20,000 waves will catch most full-time practices eventually. Start keeping digital records now, pick software early, and if you use an accountant, ask how they will handle the quarterly cycle.

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