Making Tax Digital for sole traders: everything you need to know for April 2026

Making Tax Digital for Income Tax is the biggest admin change facing many sole traders. From April 2026, higher-income sole traders will need to keep digital records and send quarterly updates to HMRC using compatible software.

Who is affected?

The rollout is based on qualifying income from self-employment and property. For sole traders, the key thresholds are:

• From April 2026: qualifying income over £50,000.
• From April 2027: qualifying income over £30,000.
• From April 2028: qualifying income over £20,000.

HMRC looks at income before expenses, not profit after expenses. If your turnover is near a threshold, do not wait until the last minute to check whether you need MTD-compatible records.

What changes under MTD?

MTD does not create a new tax. It changes how records are kept and how information is sent to HMRC. Instead of keeping paper records or a simple spreadsheet that is retyped into Self Assessment once a year, affected sole traders must keep digital records and use approved software or bridging software to submit updates.

Quarterly reporting

Affected sole traders will send quarterly updates during the tax year. These are summary updates of income and expenses, not a full tax return each quarter. They help HMRC see a more regular picture of business activity, but the year-end process still matters.

Read the companion guide: MTD quarterly updates: what do you actually need to send?

Approved software

You will need software that can keep digital records and submit MTD for Income Tax data to HMRC. Some sole traders will use a full accounting app; others may use spreadsheet bridging software if it fits their records and HMRC rules. Start by checking HMRC's software list, then compare cost, ease of use, accountant access, bank feeds, invoicing, and support.

See our comparison: FreeAgent vs QuickBooks vs Xero for sole traders.

What you should do now

1. Check your gross self-employed and property income against the rollout thresholds.
2. Clean up bookkeeping categories so income and expenses are easy to summarise.
3. Choose MTD-compatible software before the deadline, not during the first filing week.
4. Practise reconciling bank transactions monthly so quarterly updates are less stressful.
5. Keep estimating tax separately so January payments do not come as a surprise.

Will MTD replace Self Assessment?

Not entirely. MTD changes the flow of records and submissions, but the annual tax position still needs to be finalised. You will still need to account for adjustments, allowances, other income, and final tax due. Use the self-employed tax calculator (add PAYE or other income in the optional field if needed) to keep a separate estimate of your likely bill.

Official source

HMRC's live guidance is on GOV.UK: Use Making Tax Digital for Income Tax.