MTD for Self-Employed: What Sole Traders Need to Do

Does this apply to me?

If you work for yourself and file a Self Assessment tax return, chances are MTD already applies to you or will soon.

Making Tax Digital for Income Tax covers sole traders. That includes freelancers, contractors, tradespeople, consultants, tutors, and anyone else trading as an individual rather than through a limited company.

The start date depends on how much you bring in:

• Over £50,000 gross income → started 6 April 2026 (live now)
• Over £30,000 → starts 6 April 2027
• Over £20,000 → starts 6 April 2028

Gross income means your turnover. Not your profit. If you billed £52,000 last year but spent £20,000 on expenses, your qualifying income is £52,000. You're in.

One thing people miss: if you also earn rental income from property, that gets added to your self-employment income for the threshold. So a web designer earning £35,000 who also rents out a spare room for £18,000 has qualifying income of £53,000.

What's different day to day?

If you're already tracking your income and expenses in a spreadsheet or accounting app, the change is smaller than you'd think.

What you report hasn't changed much. It's how often that's different.

Under the old system you filed once a year. Under MTD, you file a short summary every quarter:

• Q1 (6 Apr to 5 Jul) → submit by 7 Aug
• Q2 (6 Jul to 5 Oct) → submit by 7 Nov
• Q3 (6 Oct to 5 Jan) → submit by 7 Feb
• Q4 (6 Jan to 5 Apr) → submit by 7 May

Then a final declaration by 31 January the following year, which replaces your old Self Assessment return.

Each quarterly update is a summary. Totals for income, totals for each expense category. Takes a few minutes if your records are up to date. Takes a lot longer if they're not.

What records do I actually need to keep?

For every transaction going through your business, you need three things recorded digitally:

1. Date it happened
2. Amount
3. Category (what kind of income or expense)

So: "15 May 2026, £2,000, consulting income." Or: "20 May 2026, £350, equipment."

The categories are similar to what you'd see on a Self Assessment form. Sales, travel, office costs, phone bills, professional subscriptions, that sort of thing. Your software should have sensible defaults built in.

You don't need to upload every receipt. But you do need the records to be digital from the start, not reconstructed from a pile of paper later.

About that software requirement

You can't file quarterly updates through the HMRC website. You need MTD-compatible software.

What you pick depends on what kind of person you are:

If you want the simplest possible option, look for a tool that does MTD submissions and not much else. Record your income and expenses, hit submit every quarter.

If you want a proper accounting setup, Xero, QuickBooks, and FreeAgent all handle MTD alongside invoicing, bank reconciliation, and reporting. More features, but more to learn.

If you love spreadsheets, you can keep your records in one. But you'll need a bridging tool to submit the data to HMRC because a spreadsheet on its own can't talk to HMRC's systems.

Whatever you choose, get it set up now if you haven't already. We've compared options in our best free MTD software article. If you're a spreadsheet person, read can I use spreadsheets for MTD?.

Can I still claim expenses?

Yes. Everything you could claim before, you can still claim under MTD. Travel, equipment, working from home, phone, insurance, training. Nothing has changed on that front.

The difference is that you're recording and reporting those expenses as they happen throughout the year, rather than totting them all up at the end.

For many self-employed people, this is actually better. Under the old system, it was easy to forget about a claimable expense from last February by the time you got around to your tax return in December. With quarterly updates, you're dealing with fresher data.

What about my accountant?

MTD doesn't force you to sack your accountant. If you've got a good one, keep them.

What will change is how you work together. If your current arrangement involves handing over a carrier bag of receipts once a year, that's done. Your records need to be digital and kept up to date. Many accountants are asking their clients to use specific software so they can access records throughout the year rather than getting a data dump in January.

Have a conversation with your accountant about the setup. Ask what software they recommend, how often they expect you to update your records, and whether their fees will change (because quarterly involvement is more work for them too).

If you don't use an accountant and handle your own tax, that's fine. MTD software is designed for people who aren't accountants. The whole point is that you can do this yourself.

Penalties for getting it wrong

New system, new penalty rules.

Miss a quarterly deadline and you get a penalty point. Four points within two years and you get fined £200. Keep missing deadlines after that and it's another £200 each time.

But there's a cushion: HMRC won't dish out penalty points for late quarterly updates in your first year. So if you're in the first wave (started April 2026), the 2026/27 tax year is your chance to find your feet without risking fines on the quarterly stuff.

The final declaration deadline (31 January) is enforced from the start though. And late payment penalties haven't changed either.

Full details in our penalties guide.

Your checklist

In order of priority:

1. Check your gross income. Self-employment turnover plus any rental income. Over £50k? You're already in MTD from April 2026.

2. Pick software. HMRC's GOV.UK site has a list of approved options. Don't overthink it. You can switch later.

3. Start recording now. Set up your software and start logging income and expenses today. Your first quarterly update (Q1) is due 7 August 2026.

4. Set reminders. Put 7 Aug, 7 Nov, 7 Feb, and 7 May in your calendar. Set alerts for a week before each.

5. Speak to your accountant (if you have one). Find out their plan for MTD and how you'll work together.

The people who find this stressful will be the ones who ignore it until July and then scramble to set everything up with the first deadline a month away.