Making Tax Digital for sole traders
Sole traders with turnover above £50,000 joined Making Tax Digital in April 2026, and those above £30,000 join in April 2027. You keep digital records, send HMRC four quarterly updates of income and expenses, then file a final declaration instead of a Self Assessment return.
What actually changes
Three things. Your records have to be digital and kept as you go. You send HMRC a summary four times a year. And your annual return becomes a final declaration that sits on top of those quarterly figures.
What does not change: your tax rates, your allowances, your payment dates and the basic way your profit is calculated.
More than one business
Each self-employment is a separate income source with its own quarterly updates. A driving instructor who also does weekend photography submits two sets of four.
Both businesses’ turnover counts towards the qualifying income threshold, though, £20,000 and £14,000 combine to £34,000 and put you in from April 2027.
The cash basis is now the default
Since April 2024 the cash basis is the default for sole traders. You record income when you receive it and expenses when you pay them. It suits most small businesses and makes quarterly reporting considerably simpler.
You can elect out and use traditional accruals accounting if that reflects your business better, which is usually the case if you carry stock or invoice well ahead of payment.
Getting ready without pain
The single biggest predictor of whether MTD is painful is whether you already reconcile monthly. If you do, quarterly submission is a non-event. If you do a year’s bookkeeping every January, quarterly deadlines will hurt until that habit changes.
Start by connecting a bank feed and coding transactions weekly. It takes about fifteen minutes.
This guide is general information, current at 9 November 2026. Tax rules change and depend on your circumstances. Please take advice before acting on it.