Making Tax Digital for Sole Traders

If you're self-employed in the UK, Making Tax Digital (MTD) for Income Tax will change how you report your earnings to HMRC. From April 2026, sole traders with qualifying income will need to submit quarterly digital updates using MTD-compatible software. Here's what you need to know and how to prepare.

What Is MTD for Income Tax?

Making Tax Digital for Income Tax is an HMRC initiative that requires self-employed individuals to keep digital records and submit income and expense summaries every quarter - not just once a year on a Self Assessment tax return. The aim is to reduce errors and give taxpayers a more up-to-date picture of their tax position throughout the year.

When Does MTD Apply to Sole Traders?

The rollout is phased based on your total self-employment and property income:

• April 2026 - sole traders with annual self-employment or property income over £50,000.
• April 2027 - the threshold drops to £30,000.
• April 2028 - the threshold drops further to £20,000.

If your income is below these thresholds, you won't need to comply yet, but it's worth preparing as the thresholds may continue to drop.

What Do Sole Traders Need to Do?

Under MTD for Income Tax, sole traders will need to:

1. Keep digital records of income and expenses. This can be a spreadsheet - it doesn't have to be accounting software.
2. Submit quarterly updates to HMRC. These are cumulative summaries of your income and expenses from 6 April to the end of each quarter.
3. Submit a Final Declaration by 31 January following the end of the tax year. This replaces the current Self Assessment tax return and confirms the information is complete.

Do I Need to Buy Accounting Software?

No. HMRC requires that you use "compatible software" to submit your updates, but that doesn't mean you need full accounting software like Xero or QuickBooks. MTD bridging software is an officially supported category that lets you keep your existing spreadsheet and simply submits the data to HMRC in the required format.

This is particularly useful for sole traders who have a simple business structure - one income source, straightforward expenses - and already track everything in Excel or Google Sheets.

MTD Quarterly Submission Deadlines for Sole Traders

Quarterly updates must be submitted by specific deadlines. For the standard tax year (6 April to 5 April), the quarterly periods and deadlines are:

How qwartly Helps Sole Traders

qwartly is MTD bridging software built for sole traders who want to keep their spreadsheets. Here's how it works:

1. Upload your spreadsheet - the same Excel, CSV, or ODS file you already use to track your business income and expenses.
2. Map your columns - tell qwartly which columns represent income, expenses, and dates. This mapping is saved so you only do it once.
3. Submit to HMRC - qwartly formats your data and submits it directly via HMRC's official Making Tax Digital API. You get a confirmation reference instantly.

At £49 per year, qwartly costs a fraction of traditional accounting software. There are no monthly fees, no per-submission charges, and no hidden costs.

How to Prepare for MTD as a Sole Trader

• Check if you're affected - do your self-employment earnings exceed £50,000 per year? If so, MTD starts for you in April 2026.
• Organise your spreadsheet - make sure you have clear columns for dates, income amounts, and expense amounts.
• Sign up for MTD bridging software - get set up before the first deadline so you're not rushing.
• Register for MTD with HMRC - you'll need to sign up for Making Tax Digital through your Government Gateway account.

Related Guides

• What is MTD bridging software? - learn how bridging software lets you keep your spreadsheet and submit to HMRC.
• MTD for landlords - Making Tax Digital requirements for UK property income.
• MTD bridging software pricing - see how qwartly compares to other MTD-compatible software.