Making Tax Digital for sole traders and the self-employed

Written by the Quidtrail team · Facts last checked 18 October 2026

The short answer: if you're self-employed and your turnover (plus any property income) was over £50,000, Making Tax Digital (MTD) for Income Tax has applied to you since 6 April 2026. Over £30,000, it starts on 6 April 2027, and over £20,000 on 6 April 2028. You keep digital records of your business income and expenses, send quarterly updates through compatible software, and submit your tax return through it by 31 January (GOV.UK).

When MTD starts for the self-employed

Source: GOV.UK. HMRC expects around 1,077,000 more sole traders and landlords to join in April 2027 (GOV.UK news, 5 October 2026).

What counts: turnover, not profit

Qualifying income is your turnover, the total before expenses, from all your self-employment and property income combined. A salary from a job (PAYE), pensions, dividends and a partnership profit share don't count (GOV.UK).

Points sole traders often miss (GOV.UK):

• Employed and self-employed? Only the self-employed turnover (and any property income) counts.
• First year of trading? HMRC annualises a short period. Six months' trading is doubled.
• Transition profits from basis period reform don't count.
• VAT-registered on the cash basis? You can include or exclude VAT in income. If you include it, it counts.

More detail: MTD qualifying income explained.

What you have to do

1. Keep digital records

For each sale and expense, record the amount, date and category, using the same categories as Self Assessment. Keep your original records or copies (bank statements, invoices) too (GOV.UK).

Sole-trader specifics from HMRC's guidance (GOV.UK):

• More than one trade? Keep separate records and send separate quarterly updates for each business. HMRC's example is an electrician who is also a driving instructor.
• Turnover under £90,000 for a trade? You can use simpler categorisation: you only need to record whether each item is income or an expense.
• Retailers can record daily gross takings instead of each sale.
• Simplified expenses: if you're sure you'll use them, you don't need digital records of the actual costs they replace.
• Trading allowance: if you claimed it last year, you still keep digital records and claim it in the tax return.
• Mixed business and personal costs: record the allowable part, or the full amount and adjust at the year end.

2. Send quarterly updates

These are year-to-date summaries, not tax returns. You send one for each business, even if you had no income that quarter (GOV.UK). The deadlines are 7 August, 7 November, 7 February and 7 May. See MTD quarterly deadlines.

If your accounting period isn't 6 April to 5 April, check how HMRC expects you to adjust. A 1 April to 31 March year should use calendar update periods, which you select before your first update (GOV.UK; GOV.UK).

3. Adjust and submit your tax return

At the year end you make adjustments (disallowable expenses, capital allowances, and accruals if you use traditional accounting, since cash basis is the default), add other income and submit your tax return by 31 January (GOV.UK: adjust; GOV.UK: tax return). See the MTD year-end tax return.

CIS subcontractors

HMRC says it will add Construction Industry Scheme (CIS) subcontractor deductions to your tax return for you. You must check them before you submit (GOV.UK). Your CIS turnover still counts towards qualifying income, because it's self-employment income.

Sole trader and landlord?

Your turnover and rents are added together for the threshold. Then you keep separate records and send separate quarterly updates for the trade and the property business (GOV.UK; GOV.UK). Check that your software supports both income types. Some products need a separate account or paid add-on for the second source. See MTD for landlords.

Hairdressers, taxi drivers and other trades

The rules are the same for every trade. What differs is what you need from software: mileage tracking for drivers, CIS for builders, daily takings for retailers. Check those features on the provider's own pages, and check that the product is listed on HMRC's software finder, which lets you filter by income source and features.

Choosing software

HMRC says choose software before you sign up, and it doesn't recommend products (GOV.UK). Questions to ask:

• Does it support every trade you run, and property income if you have it?
• Does it file the tax return as well as quarterly updates?
• Bank feeds, receipt capture, mileage, CIS?
• Agent access for your accountant?
• The full-year price after any introductory offer?

See free MTD software, MTD software costs and spreadsheets and bridging software. Visit QuickBooks · Visit Xero · Visit Sage

Related: MTD for Income Tax guide · How to sign up · Qualifying income

Last checked against GOV.UK on 18 October 2026. Not tax advice.