Making Tax Digital from April 2026: What It Means for Sole Traders (and How to Prepare)

Quick Answer

From April 2026, self-employed people and landlords with income over £50,000 must use "Making Tax Digital for Income Tax" (MTD for ITSA). This means keeping digital records and sending quarterly summaries to HMRC—instead of just filing one return at the end of the year.

Disclaimer

This tool provides estimates and organisation help only. It's not financial advice. Always check HMRC guidance or a qualified accountant for your situation.

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What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's plan to move tax administration online. Instead of submitting one annual tax return, you'll:

Keep digital records of your income and expenses
Send quarterly updates to HMRC (summary figures, not every receipt)
Submit a final declaration at the end of the tax year

The goal is to reduce errors, give people a clearer picture of their tax position throughout the year, and modernise the tax system.

Who Needs to Use MTD and When?

MTD for Income Tax is being rolled out in phases:

Threshold	Start Date
Income over £50,000	April 2026
Income over £30,000	April 2027
Income below £30,000	To be confirmed (may remain voluntary)

Important: The income threshold is your gross income (turnover), not profit. If you have both self-employment and property income, they're combined.

Do I Need to Sign Up?

If your self-employed or property income exceeds the threshold, you'll be required to use MTD. If you're below the threshold, you can still choose to use compatible software—it's just not mandatory yet.

What Are Quarterly Updates?

Under MTD, you'll send HMRC a summary of your income and expenses four times a year. These aren't full tax returns—just snapshot figures.

The Quarterly Periods

For most people, the quarters align with the tax year:

Quarter	Period	Deadline
Q1	6 April – 5 July	7 August
Q2	6 July – 5 October	7 November
Q3	6 October – 5 January	7 February
Q4	6 January – 5 April	7 May

You have roughly one month after each quarter ends to submit your update.

What Gets Sent?

Your quarterly update includes:

Total income for the quarter
Total expenses for the quarter
(That's basically it—high-level figures)

You don't send individual receipts or transaction details. HMRC just wants the totals.

What Does "Digital Records" Mean?

"Digital records" sounds technical, but it's simpler than you might think.

What Counts as Digital?

Your records must be stored in a way that allows them to be:

Searched and sorted (not just paper in a shoebox)
Backed up (ideally cloud-based)
Submitted to HMRC via compatible software

What Doesn't Count?

Paper receipts alone (though you can photograph them)
A Word document with typed figures
Basic spreadsheets that don't connect to HMRC-compatible software

Practical Options

Accounting software (FreeAgent, QuickBooks, Xero, etc.)
HMRC-compatible apps (various free and paid options)
Spreadsheets with bridging software (some tools can submit from Excel/Google Sheets)

The key is that whatever you use can send data to HMRC in the required format.

How to Prepare (Without Stress)

You don't need to panic. April 2026 is still a way off, and the transition can be gradual.

Step 1: Check If You're Affected

Look at your gross income for the current year. If you're over £50,000 (or close to it), assume you'll need MTD from April 2026.

Step 2: Start Tracking Quarterly Now

Even before MTD becomes mandatory, tracking your figures quarterly is smart. It helps you:

Spot problems early (unexpected drops in income, rising expenses)
Avoid a surprise tax bill
Build the habit before it's required

Step 3: Choose Your Method

Decide how you'll keep digital records:

Full accounting software – Best if you have lots of transactions
Simple tracking + bridging – If you want to keep things lightweight
Bank CSV imports – Download your transactions, categorise them, done

Step 4: Do a Trial Run

Before April 2026, try running through a quarter. Calculate your totals as if you were going to submit. This reveals any gaps in your process.

Step 5: Get Help If Needed

If this feels overwhelming, speak to an accountant. Many now offer MTD-ready packages that handle the submissions for you.

Common Misconceptions About MTD

"I have to send every receipt to HMRC"

No. You send summary totals. Keep receipts for your own records (HMRC can ask for evidence later), but quarterly updates are just the headline numbers.

"I need expensive software"

Not necessarily. There are free and low-cost options. Some bridging software works with basic spreadsheets.

"This means more tax to pay"

No. MTD doesn't change how much tax you owe—it changes how you report it. If anything, better tracking might help you claim all your expenses and pay the right amount (not more).

"I'll get fined immediately if I make a mistake"

Unlikely. HMRC has said there'll be a "soft landing" period with warnings rather than instant penalties for genuine mistakes.

How Dude, What's My Tax? Helps

We've built features specifically to help you prepare for MTD—without the complexity of full accounting software.

MTD Quarterly Mode

Our MTD Quarterly feature lets you:

Lock each quarter's figures once you're happy with them
See quarterly totals for income, expenses, and profit
Export quarter summaries as PDF for your records

This isn't submission to HMRC (we're not a submission tool), but it's perfect for preparing your figures before you submit through an official channel.

Expenses CSV Import

Don't want to enter every transaction manually? Our Expenses CSV Import lets you:

Import your bank statement (Monzo, Tide, Revolut, Starling, or any bank that exports CSV)
Auto-categorise transactions based on merchant names
See monthly and quarterly expense totals instantly
Avoid duplicates when importing overlapping periods

Combined with MTD Quarterly mode, you can go from raw bank data to locked quarterly figures in minutes.

Estimated Tax Throughout the Year

Our calculator updates your estimated tax bill as you add income and expenses. No more guessing what January's bill will be—you can see it building quarter by quarter.

FAQ

When does MTD for Income Tax actually start?

April 2026 for those with income over £50,000. April 2027 for income over £30,000. Those below £30,000 may remain on the current system (to be confirmed).

What counts towards the £50,000 threshold?

Your gross self-employment income plus any property income. It's turnover, not profit.

Do I need to buy accounting software?

Not necessarily. There are free options and bridging software that works with spreadsheets. The key is that your records are digital and can be submitted in the right format.

What happens if I miss a quarterly deadline?

HMRC has indicated a "soft landing" period. Initially, you're likely to get warnings rather than penalties. Long-term, there will be a points-based penalty system.

Can my accountant handle MTD for me?

Yes. Many accountants offer MTD services where they submit quarterly updates on your behalf. You'll still need to provide them with your figures.

Is MTD the same as my annual tax return?

No. Quarterly updates are simpler—just summary totals. You'll still do a final "end of period statement" and declaration, similar to completing your return now.

What if my income fluctuates around the threshold?

If you're close to £50,000, plan as if you'll need MTD. If your income drops below the threshold later, you may be able to leave MTD (rules to be confirmed).

Does this affect my tax bill amount?

No. MTD changes how you report, not how much you pay. Your tax calculation remains the same.

Next Steps

Start building your quarterly tracking habit now. You don't need to wait for April 2026 to benefit from clearer visibility of your finances.

Open the Dashboard →

Explore our MTD Quarterly feature to lock and export your quarterly figures, or try Expenses CSV Import to get your bank transactions organised.

Back to the Learn hub.

This guide is for general information only. Tax rules change, and everyone's situation is different. Always check the latest HMRC guidance and consider speaking to a qualified accountant if you're unsure.