How Will Making Tax Digital Affect UK Doctors' Private Practice & Locum Income

What Is Qualifying Income for Making Tax Digital for Doctors? 

Understanding qualifying income is critical when assessing whether MTD applies to you. Qualifying income means the total gross amount earned from self-employment and property sources combined, calculated before deducting any expenses. 

For MTD purposes, HMRC takes into account only self-employment income and property income when assessing whether you fall within the scope of MTD for medical professionals. 

How MTD Changes Daily Record-Keeping for Medical Professionals?

The most immediate impact of Making Tax Digital for medical professionals is the requirement to maintain digital records of all income and expenses. This represents a significant shift for many medical professionals who currently use paper diaries, manual spreadsheets, or basic accounting methods.

 Under MTD for medical professionals, you must use compatible software to record all your business transactions. For doctors, this means logging every private consultation fee, locum shift payment, medical report fee, and expense claim digitally. The software must be capable of storing records electronically and submitting updates to HMRC through their application programming interface (API); a digital gateway that allows your software to send information directly to HMRC in a secure, standardised way. 

Many doctors worry this will create additional administrative burden, but modern MTD-compatible software is designed to streamline record-keeping rather than complicate it.

The digital requirement doesn't mean you can't keep paper receipts, but you'll need to ensure the information is entered into your MTD-compatible software. For busy doctors managing clinical work alongside administrative tasks, choosing user-friendly software with mobile functionality can make compliance far less onerous than it initially appears. 

Quarterly Reporting Requirements for Making Tax Digital for Doctors

One of the most significant changes under Making Tax Digital for doctors is the shift from annual to quarterly reporting. Instead of completing a single self-assessment tax return each January, you'll need to submit quarterly updates to HMRC summarising your income and expenses for that period. 

Taxpayers have two options for submitting quarterly updates under MTD for income tax: standard quarters or calendar quarters. You can choose the option that best fits how you currently keep your records, but once selected, the same approach must be used consistently throughout the tax year.

Importantly, the submission deadlines remain the same under both options, so the choice is more about convenience and alignment with your bookkeeping rather than compliance dates.

Under both options, quarterly updates are cumulative submissions. This means each update includes all income and expenses from the start of the tax year (6 April)/(1 April for calendar quarter) up to the end of that quarter, not just the figures for the most recent three months. If earlier figures change, they are automatically corrected in the next update, reducing the risk of errors building up over time.

It’s also important to note that quarterly updates are not tax calculations or payment requests. They are simply information submissions designed to keep HMRC informed of your income throughout the year.

Understanding the Final Declaration  

After completing your four quarterly updates, you'll need to finalise your tax position for the year through a process of submitting your Final Declaration under MTD for income tax for doctors. 

The Final Declaration is your complete tax return for the year, due by 31 January following the end of the tax year (so the Final Declaration for 2026/27 will be due by 31 January 2028). This is a crucial development: unlike earlier expectations, you must submit your Final Declaration using MTD-compatible software.  

In your Final Declaration, you'll include all your other income sources that don't fall under MTD requirements, such as employment income from your NHS work, dividends, savings interest, and pension income. You'll also claim any tax reliefs, allowances, and deductions that weren't included in your quarterly updates. 

Penalty and Compliance Risk Under Making Tax Digital for Doctors

The New Points-Based Penalty System for MTD

HMRC has introduced a completely new penalty regime alongside MTD, moving away from automatic fixed penalties to a points-based system designed to encourage consistent compliance while being more forgiving of occasional errors. 

Under the points-based system, you receive one penalty point each time you miss a submission deadline.

For doctors making Quarterly Submissions:

A £200 penalty applies once you accumulate four points. After reaching this threshold, every additional late submission triggers another £200 penalty. 

For the annual Final Declaration:

The threshold is lower: you’ll receive a £200 penalty once you accumulate two points for late annual filings. Each subsequent late annual submission incurs another £200 penalty. 

Resetting Penalty Points 

Penalty points don’t remain on your record indefinitely, but they only reset if two conditions are met: 

• All outstanding submissions are brought up to date, and 

• You achieve a full compliance period with no late filings. 

The compliance period depends on your submission frequency: 

• Quarterly filers: 12 months of on-time submissions 

• Annual filers: 24 months of on-time submissions 

Late payment penalties for Doctors Under MTD for Income Tax

Late payment penalties operate separately from late submission penalties.

Although interest accrues on any unpaid tax from the original due date, taxpayers will have 30 days to settle their bill before a late payment penalty is applied. This extended 30-day window applies in the first year of the new penalty system for Making Tax Digital for Doctors, combining the standard 15-day period with an additional 15-day grace period to give taxpayers more time to pay without penalty. 

Choosing the Right MTD Software for Doctors

Selecting appropriate MTD-compatible software is one of the most important decisions doctors will make when transitioning to Making Tax Digital for income tax. The right MTD software for doctors can transform a compliance requirement into an opportunity to gain better financial visibility and control over your practice. 

When evaluating MTD software options, doctors should consider several factors specific to medical practice. 

• Multiple Income Streams Choose software that can record and categorise income from NHS work, private practice, locum agencies, and other sources.

• Expense Tracking for Doctors Ensure the software supports doctor-specific expenses such as indemnity insurance, CPD, professional fees, and home office costs.

• Integration Capabilities Look for bank feed integration and compatibility with payment platforms or practice management systems to reduce manual entry.

• Mobile Functionality A mobile app allows you to capture receipts, record mileage, and log expenses on the go, which is ideal for locum doctor

How Locum Doctors Should Approach MTD Compliance?

Locum doctors can face added complexity under MTD for doctors due to fluctuating income, multiple agencies, and working across different locations. The key first step is identifying whether each locum engagement is employed or self-employed. Only self-employed locum income falls within MTD requirements, as employed roles taxed under PAYE are excluded. Understanding how each agency treats your income is essential to ensure all reportable earnings are correctly captured.

For self-employed locum work, maintaining real-time digital records makes MTD compliance for locum doctors far more manageable. Mobile-friendly MTD software allows income and expenses to be logged immediately, reducing stress at quarter-end. Expense tracking is especially important for travel, accommodation, and professional costs, and tools such as mileage tracking apps can automate much of this process, helping even the busiest locum doctors stay compliant with minimal effort.

Integrating MTD for Private Practice Doctors with Practice Management 

Doctors running established private practices face different MTD challenges compared to locum doctors, particularly around integrating digital tax records with existing practice management systems and patient billing processes. 

The ideal approach for private practice doctors is finding MTD software that integrates with your practice management system. If your software for managing patient appointments, clinical records, and billing can export financial data to your MTD accounting software, you avoid duplicate data entry and reduce error risks. 

For doctors using separate systems, establish clear processes for transferring information. Many private practice doctors reconcile their patient billing system with their MTD software weekly or monthly, ensuring all consultation fees, procedure income, and other charges are captured in their digital tax records. 

VAT registration is relevant for some private practice doctors, and if you're VAT registered, you're likely already subject to MTD for VAT. The good news is that software used for MTD for VAT can typically handle MTD for Income Tax for private practice doctor as well, creating a unified system for all your tax compliance needs. 

Common Misconceptions About Making Tax Digital for Doctors

Many doctors approaching MTD have concerns based on misconceptions about what's actually required. Understanding what MTD for income tax for doctors does and doesn't require can alleviate much of the anxiety surrounding the transition. 

Conclusion: Embracing the Digital Tax Future 

Making Tax Digital for Doctors represents a fundamental shift in how UK doctors with private practice and locum income will manage their tax affairs. While the transition may seem daunting, particularly for those unfamiliar with digital accounting systems, MTD ultimately offers opportunities for better financial management and more accurate tax compliance. 

For locum doctors and those running private practices alongside NHS work, MTD for doctors is simply the new reality of tax compliance. By understanding the requirements, choosing appropriate software, establishing good digital record-keeping habits, and seeking professional support when needed, you can ensure your transition to Making Tax Digital is smooth and successful. 

The digital tax future is here. With proper preparation and the right approach, MTD can become an asset to your practice management rather than a burden to be endured. 

Frequently Asked Questions