Making Tax Digital for Sole Traders: The Complete Guide

Making Tax Digital can feel like a collection of separate questions: am I affected, what software do I need, and when do I send updates? This guide brings the essentials together and points you to detailed help for each step.

Table of contents: tap to view sections

• What is Making Tax Digital for Income Tax?
• Who needs to use MTD, and when?
• What records should you keep?
• Can you use Excel or bridging software?
• How do you sign up?
• When are quarterly updates due?
• Do you still complete an annual tax return?
• Do you need an accountant, and what about penalties?
• Where does TaxSnapper fit?

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is a way of doing Self Assessment through compatible software. People within scope keep digital business records, send quarterly updates and complete an annual tax return using software. It is a reporting change; keeping good records remains the foundation.

For the wider picture, start with our UK tax guide for sole traders. If you are wondering whether your annual return disappears, read whether MTD replaces Self Assessment.

Who needs to use MTD, and when?

MTD applies to qualifying sole traders and landlords, subject to exemptions. The threshold uses qualifying income from self-employment and property before expenses, rather than business profit. Having a PAYE job does not, by itself, bring someone into MTD.

The phased start dates are:

2024/25 qualifying income over £50,000: start from 6 April 2026. 2025/26 qualifying income over £30,000: start from 6 April 2027. 2026/27 qualifying income over £20,000: start from 6 April 2028.

Check our MTD eligibility guide and use the practical MTD checklist to plan your next steps. HMRC’s eligibility guidance also covers checking exemptions.

What records should you keep?

Digital records generally need the amount, date and income or expense category. Keep supporting evidence too: creating a transaction entry does not remove the need to retain the documents behind it.

Our complete allowable expenses list helps you understand business costs, while our guide to keeping receipts for tax explains the evidence to retain. HMRC provides detailed digital record keeping guidance.

Can you use Excel or bridging software?

Spreadsheets can form part of an MTD setup, but a spreadsheet alone cannot send the required submissions. You need compatible software and a working digital connection between the products you use. Check the provider supports Income Tax, your income sources and the annual tax return, as well as quarterly updates.

Read how Excel fits into MTD, then explore our bridging software guide. Check current features and terms with each provider and consult HMRC’s software guidance before choosing.

How do you sign up?

Check your start date, any exemption and whether HMRC has already enrolled you. From September 2026, HMRC began signing up mandatory 2026/27 users who had not signed up themselves. If enrolled, check the recorded income sources and follow HMRC’s next-step instructions; otherwise use the official sign-up service or an authorised agent. Choose suitable software and authorise its connection. Buying an app or downloading a report does not complete those steps.

Our step-by-step MTD sign-up guide walks through registration and connecting submission software.

When are quarterly updates due?

Quarterly updates summarise business income and expenses. Each update covers the tax year to date, rather than just the latest three months. Standard deadlines are 7 August, 7 November, 7 February and 7 May. Check the periods selected in your submission software.

See the full 2026/27 MTD deadline calendar and HMRC’s quarterly update guidance. Keep the annual return deadline in your diary too.

Do you still complete an annual tax return?

Yes. Quarterly updates do not finish your tax affairs for the year. You must review the figures, make necessary adjustments, include other relevant income and complete the annual return through compatible software. The annual filing deadline remains 31 January after the tax year ends; MTD does not itself introduce quarterly tax payment deadlines.

Our guide to preparing your own tax return covers organising your information. For tax years before you join MTD, see our Self Assessment filing walkthrough.

Do you need an accountant, and what about penalties?

You can manage MTD yourself if you have suitable software and understand your obligations. Extra support may help with complex affairs or uncertainty. Read when an accountant can help with MTD and our guide to managing MTD costs.

HMRC says it will not apply penalty points for late quarterly updates in 2026/27. The updates still need to be submitted, and this does not remove annual filing or payment obligations. Our MTD penalties guide explains the different issues to consider.

Where does TaxSnapper fit?

TaxSnapper is designed for UK sole traders who want to record income and expenses, store receipt images, monitor estimated tax and export quarterly or annual reports without a monthly subscription.

TaxSnapper does not submit MTD updates or tax returns directly to HMRC. A CSV export is a record export, not a completed submission. Before using it as part of your MTD process, confirm that your chosen compatible software or accountant can use the export, preserve the required digital links and cover all your reporting obligations.

Explore TaxSnapper’s record keeping and report features to see how it can support your routine.

Reviewed 11 October 2026. General information for UK sole traders, not individual tax advice. Check HMRC’s current guidance for your circumstances.

Official source: HMRC’s overview of using MTD for Income Tax.