Making Tax Digital for Sole Traders: what you need to do (Income Tax)

Making Tax Digital — MTD for short — has a way of sounding like a great upheaval. For most sole traders it isn't. It changes how you report your income to HMRC, not what you owe, and it's being phased in gradually over several years, starting with higher earners. The first stage began in April 2026; if your income is modest, it may not affect you for some time yet, or at all.

This guide explains what MTD for Income Tax is, when it applies and to whom, and what you'll actually need to do — in plain English, with the figures taken straight from gov.uk.

A quick note before we start: TrustSolo isn't a law firm or an accountancy, and nothing here is tax advice. It's a plain-English explainer to help you understand a change that's already under way. For your own circumstances, an accountant is the right port of call — and, as we'll be candid about below, TrustSolo is not MTD-filing software.

What Making Tax Digital for Income Tax actually is

Today, most self-employed people report their income once a year through a Self Assessment tax return. Making Tax Digital is HMRC's new way of doing the same job. Instead of one annual return, it asks you to:

• keep digital records of your business income and expenses,
• send HMRC a short update every quarter (four times a year), and
• submit a final declaration after the tax year ends — the year-end step that confirms your figures and settles your tax, doing the job your Self Assessment return does today.

All of it goes through software that's compatible with MTD, rather than the current online form. The important thing to hold onto is that this is a change to the plumbing of reporting. It doesn't change the tax rates, your allowances (see how much tax you'll pay), or when the tax is due — the familiar 31 January payment deadline still stands, payments on account included.

When it applies to you

MTD for Income Tax is being introduced in stages, starting with the highest incomes and working down. The date you're brought in depends on your qualifying income (more on exactly what that means below):

• Over £50,000 — MTD has applied since 6 April 2026.
• Over £30,000 — from 6 April 2027.
• Over £20,000 — from 6 April 2028.

One detail that trips people up: HMRC looks at the income on your last completed tax return to decide whether you're in. So the April 2026 start was based on your 2024–25 figures, the April 2027 start will be on your 2025–26 figures, and so on. It's worth a glance at your most recent return to see which side of the line you fall — for the April 2027 stage, that's a return you may already have filed.

If your qualifying income is £20,000 or below, you're not currently required to use MTD at all — you carry on with Self Assessment as you do now. It applies to sole traders and landlords registered for Self Assessment; partnerships are due to be brought in later.

What counts as your "qualifying income"

This is the part worth getting right, because it's not quite what people assume. Your qualifying income is the total income you get in a tax year from self-employment and property — and crucially, HMRC assesses your gross income, meaning your turnover before you take off any expenses. It is not your profit.

Two things follow from that. First, the threshold is easier to cross than a profit figure would be — a freelancer turning over £55,000 but taking home rather less is still measured on the £55,000. Second, self-employment and property income are added together. HMRC's own example: someone with £25,000 of rental income and £27,000 from self-employment has a qualifying income of £52,000 — over the £50,000 line, even though neither source reaches it alone.

If you have a mix of income, it's worth doing this sum before assuming you're out of scope.

What you'll actually need to do

Once MTD applies to you, the practical shape is:

• Keep your records digitally — your income and expenses stored in software as you go, rather than in a shoebox or reconstructed at year end.
• Send four quarterly updates — a running summary of your income and expenses, submitted through your software after each quarter.
• Make a final declaration after the tax year — confirming the full picture, claiming any reliefs, and finalising what you owe.

You'll need software that's compatible with Making Tax Digital to do the quarterly updates and the final submission — HMRC keeps a list of recognised options — or an accountant who files on your behalf.

How to get ready

If your date has already passed, this is a live obligation and the place to start is HMRC's guidance on when to sign up, or a word with your accountant. If it hasn't, a couple of quiet habits make the transition a non-event when your year comes.

The single most useful thing is to keep your records digitally from now on, rather than on paper. If your income and expenses already live in software, quarterly updates become a matter of a few clicks rather than a scramble. Keeping your freelance money in a separate account helps here too, by making your income obvious at a glance.

Beyond that: know roughly what your qualifying income is, so you can see your threshold year coming; and keep an eye on the official guidance, since dates and details can shift. That really is enough to be going on with.

Where TrustSolo fits — and where it doesn't

We want to be straight about this. TrustSolo keeps tidy digital records of your invoicing and runs a live estimate of your Income Tax and Class 4 National Insurance as you work, so you can see roughly what's building up and set money aside in good time. Keeping organised digital records as you go is exactly the habit MTD rewards. (If you'd just like a quick figure before signing up to anything, you can estimate your own bill with our free tax calculator.)

But TrustSolo is not MTD-compatible filing software. It does not send your quarterly updates to HMRC, and it does not submit your final declaration. The tax figure it shows you is a guide to what's likely owed — not a tax return, and not a submission. When MTD applies to you, you'll make those submissions through HMRC-recognised software or through an accountant; TrustSolo sits alongside that, helping you stay organised and unsurprised, not in place of it.

We'd rather tell you plainly where the line is than let you find it at the wrong moment.

If you'd like to keep your numbers in order in the meantime — tidy records as you invoice, and a running tax estimate so nothing lands as a shock — you can start free, no card required.