Making Tax Digital Is Here: What UK Sole Traders Must Do Now

The biggest change to how sole traders report tax in a generation is now live. Making Tax Digital (MTD) for Income Tax Self Assessment makes digital record keeping and quarterly reporting mandatory for hundreds of thousands of self-employed people and landlords. If you’re affected, the old once-a-year scramble is over — like it or not. Here’s what you must do.

Who has to comply — and when

MTD for Income Tax is mandatory from 6 April 2026 for anyone with qualifying income over £50,000 — measured on the 2024/25 tax year. The net widens in stages: from 6 April 2027 it covers qualifying income over £30,000, and from 6 April 2028 it drops to over £20,000.

“Qualifying income” is the figure to watch: it’s your gross income from self-employment plus property income, before expenses. Not your profit — your turnover. Plenty of sole traders whose profits look modest are caught by a gross figure over the line.

What MTD actually requires

Three obligations, all digital:

1. Keep digital records. Your business income and expenses must be recorded digitally, in real time or as close to it as practical — no more shoebox of paper receipts handed to an accountant in January.

2. Send quarterly updates. Every quarter you submit a summary of your income and expenses to HMRC through compatible software. These aren’t tax payments — they’re updates, giving you (and HMRC) a running estimate of your tax bill through the year.

3. File your tax return through compatible software. Your year-end Self Assessment still exists, but it must be submitted digitally through software that connects to HMRC — not typed into a web form or posted on paper.

The common thread: everything flows through software recognised as compatible with MTD. Spreadsheets alone don’t cut it unless they’re paired with bridging software.

The practical timeline

If your 2024/25 qualifying income topped £50,000, you’re in the first wave — and HMRC has been automatically signing up affected taxpayers rather than waiting for volunteers. If you’re near a threshold, don’t wait for a letter: check your figures, assume you’re in, and prepare. The £30,000 wave from April 2027 will pull in a huge number of part-time and side-hustle sole traders — if that’s you, your preparation year is now. Side-hustlers with very small earnings should also check the £1,000 trading allowance — trading income of £1,000 or less in a tax year doesn’t have to be reported at all.

What stays the same

MTD doesn’t change what tax you owe, when you pay it (31 January and 31 July as before), or what counts as an allowable expense. It changes how you record and report. The tax calculation rules are untouched — the admin around them is transformed.

How to get ready

Check your qualifying income now. Add up your 2024/25 gross self-employment and property income before expenses. Over £50,000? You’re in wave one. Over £30,000? April 2027.

Move your records digital. If any part of your bookkeeping still lives on paper, migrate it. Every receipt should be photographed and logged as it happens — quarterly updates punish the “I’ll sort it in January” habit far more than the annual return ever did.

Choose compatible software. You’ll need software that keeps digital records and submits quarterly updates to HMRC. Pick one before your first quarterly deadline, not the week of it.

Talk to your accountant early. Agents can be authorised to handle MTD on your behalf, but the quarterly rhythm means they need your records continuously, not once a year. Agree the workflow now.

How Lemon fits

MTD rewards one habit above all: clean digital records kept through the year. Lemon’s OCR receipt scanning and tagged expense logging build exactly that record — every business expense captured digitally, categorised, and exportable. Quarterly updates stop being a scramble and start being a summary.

This article is general information, not tax advice. For your specific situation, talk to an accountant.

Download Lemon free on the App Store or Google Play — keep clean digital records of every expense so quarterly updates take minutes.