For most people it comes down to three things: keeping your records digitally, sending short updates to HMRC during the year, and finalising your tax position at the end of the tax year.
No new taxes. No sudden extra payments. Just a different way of reporting.
The problem is that most explanations of Making Tax Digital are written for accountants rather than the people actually running businesses. So here’s the simple version of what sole traders need to know before April 2026 — and how to prepare without turning your evenings into a bookkeeping session.
The Making Tax Digital Timeline
According to GOV.UK sign-up guidance for MTD, sole traders with qualifying income over £50,000 must sign up for Making Tax Digital for Income Tax before their obligations begin in April 2026.
What Sole Traders Need To Do (2026–2028)
Making Tax Digital for Income Tax is coming. If you’re a sole trader, landlord, or subcontractor, the way you report tax to HMRC is about to change.
The good news: it’s not as complicated as people think. Here’s the simple version of what actually happens.
Check If MTD Applies To You
First question: how much do you earn? MTD applies based on your total business income. Not profit. Income.
| Qualifying income | MTD start date |
|---|---|
| £50,000+ | April 2026 |
| £30,000+ | April 2027 |
| £20,000+ | Expected April 2028 |
If you’re below £20k you can still use MTD software, but it’s not mandatory yet.
Stop Using Paper Records
Under MTD you must keep digital records. That means:
- Recording income digitally
- Recording expenses digitally
- Keeping receipts digitally
This does not mean complicated accounting software. A simple digital system is enough.
Important: Spreadsheets alone won’t always work properly because HMRC requires digital links between records and submissions.
Send Updates To HMRC Every Quarter
Instead of one tax return a year, you’ll send four quick updates. Each update shows:
- Income so far
- Expenses so far
- Estimated tax position
Typical deadlines look like this:
| Period | Deadline |
|---|---|
| Apr – Jul | 7 Aug |
| Jul – Oct | 7 Nov |
| Oct – Jan | 7 Feb |
| Jan – Apr | 7 May |
Remember: These are updates, not final tax returns. You can still make corrections later.
Finalise Your Tax Position
After the tax year ends you’ll confirm everything. This replaces the traditional Self Assessment return. You’ll submit:
- Final income figures
- Any adjustments
- Additional income (PAYE, interest, etc)
The familiar tax payment deadline doesn’t change
Why HMRC Is Doing This
The official reason is reducing errors. HMRC estimates billions in tax are lost each year due to incorrect records and reporting mistakes. Digital record-keeping aims to:
- Reduce errors
- Improve accuracy
- Make tax reporting more automated
For businesses already using software, the change will be minimal.
The Reality For Most Sole Traders
For many people, the biggest change isn’t the quarterly updates. It’s finally keeping records properly during the year.
When income and expenses are tracked continuously:
- Tax bills become predictable
- Refunds are more likely
- Missed expenses are reduced
Which means less panic in January.
Where 123Tax Fits In
123Tax is built for the new MTD system. Instead of scrambling at the end of the tax year, you can:
- Track income automatically
- Capture expenses during the year
- Stay ready for quarterly updates
- Estimate tax in real time
In short: less admin, fewer surprises, and no January chaos.
The Simple MTD Checklist
Before April 2026:
- Know your qualifying income
- Start keeping digital records
- Use MTD-ready software
- Track expenses during the year
- Stay ready for quarterly updates
Do those five things and MTD becomes very manageable.
What Happens Next
Making Tax Digital for Income Tax (MTD ITSA) will start affecting UK sole traders and landlords from April 2026. Anyone earning more than £50,000 in qualifying income will need to keep digital records and send quarterly updates to HMRC using compatible software.
The rules will expand to those earning over £30,000 from April 2027 and are expected to apply to incomes above £20,000 from April 2028.
Although the system introduces quarterly submissions, the core tax deadlines remain the same. The final declaration replacing the traditional Self Assessment return will still be due by 31 January following the end of the tax year.
Preparing early by keeping digital records, tracking expenses during the year and using MTD-compatible software will make the transition much easier for sole traders and small business owners.