Making Tax Digital 2026: A Trade's Guide

Making Tax Digital 2026: What Sole Trader Trades Must Do Now

Making Tax Digital for Income Tax is HMRC’s new way of running self-employed tax, and for many sole trader trades it changes from an annual chore into a quarterly one. Instead of a single Self Assessment once a year, affected trades keep digital records and send HMRC updates every quarter using compatible software. It is being introduced in stages by income level, and the first stage (income over £50,000) has been live since 6 April 2026. This guide explains who is in, when, and the practical steps to get ready without panic. It is general information, not tax advice — check your own position with an accountant.

What is changing

Under Making Tax Digital for Income Tax (often shortened to MTD for Income Tax, or MTD ITSA), you keep your business income and expense records digitally, send HMRC a summary update every quarter through approved software, and finalise the year through that same software rather than the old Self Assessment form. The tax you owe and when you pay it are not changing — what changes is how and how often you report.

Who has to do it, and when

The rollout is phased by your qualifying income — broadly your gross self-employment (and property) income before expenses:

From 6 April 2026, it is mandatory for those with qualifying income over £50,000.

From 6 April 2027, it extends to those with qualifying income over £30,000.

From 6 April 2028, it extends again to those with qualifying income over £20,000.

The threshold is based on your gross income, not your profit, which catches out a lot of trades — a sole trader turning over more than the threshold in materials and labour can be in scope even if their take-home is much lower. If your turnover is anywhere near a threshold, assume you may be affected and plan for it.

What quarterly updates actually involve

The quarterly updates are summaries, not four full tax returns. If your records are already in software, submitting one is a quick job. The real change is the habit: instead of shoving receipts in the van door pocket and sorting it all out the following January, you keep your books up to date through the year. Most trades who make the switch find that the quarterly rhythm is less stressful than the annual scramble, once they are used to it — the work is spread out rather than dumped in one dreaded weekend.

The software question

MTD requires compatible software; you cannot file a quarterly update on paper or through a spreadsheet alone unless it is bridged by approved software. The good news is there is plenty of choice aimed at sole traders and trades, much of it phone-first so you can snap a receipt at the merchant’s counter and forget about it. When choosing, look for something that is genuinely MTD-ready for Income Tax, simple enough that you will actually use it, and priced sensibly for a one-person business.

What to do now

You do not need to do everything at once, but a few steps now save a stressful spring later.

First, work out whether and when you are in scope by checking your gross income against the thresholds above. If you are close, treat yourself as in and get ahead.

Second, get your record-keeping onto compatible software before your start date. If you are already over the £50,000 line, you are in scope now and should be sending quarterly updates; if your start date is April 2027 or April 2028, start using the software now rather than the week it becomes mandatory. Going digital while there is no deadline pressure means the habit is bedded in before it counts.

Third, talk to an accountant if you use one. Many now offer to handle the quarterly submissions for you, and the cost is often modest against the time and worry it saves. Even a single conversation to confirm your start date and set up the software properly is worth it.

Why this matters beyond the deadline

Getting your books into good digital shape does more than keep HMRC happy. Up-to-date figures mean you actually know whether you are making money, which jobs are worth doing, and whether your rates are covering your costs. A lot of trades discover, once their numbers are finally in one place, that their busiest months were not their most profitable. That insight is worth more than the compliance itself.

Frequently asked questions

When does Making Tax Digital start for sole traders? It is mandatory from 6 April 2026 for those with qualifying income over £50,000, from 6 April 2027 for over £30,000, and from 6 April 2028 for over £20,000.

Is the threshold based on profit or turnover? On qualifying (gross) income before expenses, not profit. A trade with high turnover but modest take-home can still be in scope, so check your gross figure.

Do I have to send four tax returns a year now? No. You send quarterly summary updates through software, then finalise the year once. It is more frequent reporting, not four full returns.

Can I still use a spreadsheet? Only if it is combined with MTD-compatible bridging software that can submit to HMRC. A spreadsheet on its own will not meet the requirement.

What happens if I ignore it? Once you are in scope it is mandatory, and there are penalties for not complying. It is far cheaper to move your records to software early than to scramble at the deadline.

Related reading: Making Tax Digital for trades · MTD quarterly updates · VAT flat rate scheme · sole trader vs limited company