Making Tax Digital for Income Tax: what it means for therapists

If you're self-employed and above a certain income, HMRC will start requiring digital records and quarterly updates instead of a single annual return. Here's what Making Tax Digital for Income Tax actually requires, when it applies to you, and how to get ready without scrambling the week before a deadline.

What MTD for Income Tax actually is

Making Tax Digital for Income Tax (MTD ITSA) replaces the single annual Self Assessment return, for those in scope, with digital record-keeping plus quarterly updates sent to HMRC through compatible software, followed by a final end-of-year declaration. It's a change to how you report, not a new tax in itself.

The thresholds and dates

• From 6 April 2026: mandatory for self-employed people with qualifying gross income above £50,000.
• From April 2027: the threshold drops to £30,000.
• From April 2028: the threshold drops again to £20,000.

If your qualifying income sits below the threshold that applies at the relevant date, MTD ITSA doesn't yet apply to you — but the thresholds are scheduled to keep falling, so it's worth knowing the trajectory even if you're not affected on day one.

What it actually asks of your day-to-day admin

In practice, you'll need to keep digital records of your income and expenses using MTD-compatible software, and submit a quarterly summary to HMRC rather than doing everything once a year. This is a formal HMRC requirement with specific software compatibility rules — your accountant, or HMRC's own guidance, is the right place to confirm exactly what qualifies for your situation.

What this means in practice for a psychologist or therapist

Most private practitioners are affected by their qualifying self-employed income crossing the threshold, not by any technical VAT-style turnover test. If your gross self-employed income from your practice exceeds the relevant threshold once it applies to you, you're in scope from that date. The practical thing to do now is talk to your accountant about which MTD-compatible software they want you using for the tax-reporting side — well ahead of the date it becomes mandatory for you, not the week before.

Where Nerela fits — and where it explicitly doesn't

Nerela is not MTD-compatible software, and it doesn't claim to be. What Nerela does give you is clean, sequentially numbered invoice-receipts for every session, each one chained to the previous with a tamper-evident hash, so the income side of your records is already organised and exportable. That's exactly the raw material your MTD-compatible tax software — or your accountant — needs; it's just not the thing that files the quarterly update itself.

A note on VAT, if you ever sell your own software or courses

Separately from Income Tax and MTD, a company based outside the UK that sells digital services directly to UK consumers must register for UK VAT from its very first such sale, with no turnover threshold to cross first. This has no bearing on you as a therapist simply buying practice-management software — it only becomes relevant if you ever sell your own digital product, course, or app to UK clients.