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Guide · UK sole traders

MTD for sole traders: a 2026 UK guide

If you're self-employed in the UK, Making Tax Digital for Income Tax (MTD ITSA) is already in effect. Since 6 April 2026, sole traders whose 2024-25 qualifying income (gross self-employment turnover plus property income) was above £50,000 must use HMRC-compatible software and submit quarterly updates. Here's how the rules work and what to do if you haven't enrolled yet.

By Mehmet Demir · Last reviewed: 2 May 2026 · Source: HMRC · Methodology

Bottom line

MTD ITSA applies to sole traders based on gross self-employment turnover (combined with any rental income):

  • 2024-25 income above £50,000: live since 6 April 2026.
  • 2025-26 income above £30,000 (and not already in the April 2026 group): mandatory from 6 April 2027.
  • 2026-27 income above £20,000 (and not already in an earlier group): mandatory from 6 April 2028.
  • Up to £20,000 in 2026-27: not currently in scope.
Check my MTD start date →

How to prepare for MTD for Income Tax as a sole trader

The exact steps to get a self-employed business MTD-ready before mandatory enrolment.

  1. 1

    Check your start date

    Run the eligibility checker to confirm whether you are already in scope (2024-25 qualifying income above £50,000), join in April 2027 (2025-26 income above £30,000), or April 2028 (2026-27 income above £20,000), based on gross turnover combined with any rental income.

  2. 2

    Open a separate business bank account

    Mixing personal and business transactions makes digital record-keeping fragile. A dedicated account simplifies open-banking feeds and reduces year-end mistakes.

  3. 3

    Pick MTD-compatible software

    FreeAgent, QuickBooks Self-Employed, Xero, and Sage Business Cloud all work for sole traders. Match the one whose interface feels right, you'll use it weekly.

  4. 4

    Import historic transactions and tag them

    Pull in at least 12 months of bank transactions and categorise them. This builds your software's auto-suggestion accuracy and gives you a sanity-check baseline.

  5. 5

    Run a dry-run quarter

    Treat one quarter as if you were submitting, including categorisation, mileage, and expense receipts. Surfaces gaps before live submissions.

  6. 6

    Sign up with HMRC and authorise your software

    From your HMRC online account, sign up for MTD ITSA. Then connect your software using the OAuth flow and submit your first quarterly update.

How is the threshold worked out?

HMRC uses your gross turnover, money received before any expenses are deducted. So a sole trader whose 2024-25 turnover was £55,000 with £20,000 of expenses (i.e. £35,000 profit) is in the live April 2026 group - because the assessed figure (turnover) crossed £50,000 in 2024-25.

If you also receive rental income, HMRC adds your gross self-employment turnover and gross rental income together. Many people are surprised to learn that running a small side business plus letting one property can push them into MTD earlier than expected.

What changes day-to-day

  1. Digital records. Every income and expense item must be captured digitally, typically via accounting software, receipt-scanning apps, or open-banking feeds.
  2. HMRC-recognised software. Common choices for sole traders include FreeAgent, QuickBooks Self-Employed, Xero, and Sage Business Cloud Accounting.
  3. Quarterly updates. Four submissions per tax year of cumulative income and expense totals, much shorter and simpler than a full Self Assessment return.
  4. Year-end tax return. You submit your tax return through MTD-compatible software, confirming the full picture and triggering the final tax calculation.

How to prepare

  • Pick software early. Switching mid-year is painful, get set up at least one quarter before your mandatory start date.
  • Open a dedicated business bank account. Open-banking feeds make digital record-keeping almost automatic.
  • Talk to your accountant. Quarterly submissions change accountants' workflows too, agree who does what.

FAQs

Do sole traders have to use Making Tax Digital?v
Yes, if your gross self-employment income (combined with any property income) is above the qualifying threshold. HMRC checks income in specific past tax years: 2024-25 income above £50,000 → April 2026 start; 2025-26 income above £30,000 → April 2027 start; 2026-27 income above £20,000 → April 2028 start (per current HMRC guidance).
Is the threshold based on turnover or profit?v
It is based on gross turnover before deducting any business expenses. HMRC also adds rental income from any properties you let, so your combined gross income across self-employment and property is compared against the threshold.
I have multiple sole-trader businesses, are they treated together?v
Yes. HMRC sums the gross turnover from all your self-employment activities (and any property income). If the combined total exceeds the threshold, MTD applies.
Can I still use a spreadsheet?v
You can, but only if it is connected to HMRC via bridging software that submits the data through HMRC's MTD APIs. Most sole traders find it easier to move to dedicated MTD-compatible software.
How often will I submit to HMRC?v
Four quarterly updates per tax year, plus your tax return submitted through MTD-compatible software by 31 January after the end of the tax year. The submission mechanism changes; Self Assessment as a legal obligation does not disappear.
Will my tax payments change?v
No. MTD changes how you report, payment dates and the underlying tax calculation are unchanged. You still pay tax on 31 January and 31 July under the existing Self Assessment payment schedule.

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This guide is general information, not professional tax advice. Always verify against HMRC's official guidance or speak to a qualified accountant.