Guide · Updated April 2026
MTD for Sole Traders: What You Need to Know
Making Tax Digital for Income Tax is mandatory from April 2026. Here's exactly what it means for self-employed sole traders.
Important: MTD for ITSA begins 6 April 2026
If your self-employment income exceeds £50,000, you must be ready to file quarterly from this date. Your first quarterly update is due by 7 August 2026.
Am I affected by MTD as a sole trader?
You're affected by MTD for Income Tax if you're a self-employed sole trader and your gross income from self-employment (and/or property letting) exceeds the threshold:
- From 6 April 2026: Gross income over £50,000
- From 6 April 2027: Gross income over £30,000
- Future (date TBC): Gross income over £20,000
Key point:This is gross income (turnover), not profit. A sole trader plumber turning over £55,000 with £20,000 in expenses still qualifies — it's the £55,000 that counts, not the £35,000 profit.
If you also have rental income, it's combined with your self-employment income. A sole trader earning £35,000 from their trade plus £20,000 from a rental property has £55,000 qualifying income and must comply from April 2026.
What changes for sole traders under MTD?
Currently, most sole traders file a single Self Assessment tax return (SA100) once a year by 31 January. Under MTD for ITSA, that annual return is replaced by:
4 Quarterly Updates
Every quarter, you submit a summary of your income and expenses for that period to HMRC. This isn't a full tax return — it's a simple update of your figures. The quarters follow the tax year: Apr-Jul, Jul-Oct, Oct-Jan, Jan-Apr. Each is due by the 7th of the month after the quarter ends.
End of Period Statement (EOPS)
After the tax year ends (5 April), you submit an EOPS for each source of income — one for your self-employment, and one for each property business if applicable. This confirms your figures for the year are complete and accurate.
Final Declaration
This replaces the Self Assessment tax return. It brings together all your income sources, personal allowances, and tax reliefs. Due by 31 January following the tax year — the same deadline as the current SA100.
2026-27 quarterly filing timeline
| Quarter | Period | Deadline |
|---|---|---|
| Q1 | 6 April – 5 July 2026 | 7 August 2026 |
| Q2 | 6 July – 5 October 2026 | 7 November 2026 |
| Q3 | 6 October 2026 – 5 January 2027 | 7 February 2027 |
| Q4 | 6 January – 5 April 2027 | 7 May 2027 |
| EOPS | Full tax year 2026-27 | 31 January 2028 |
| Final Declaration | Full tax year 2026-27 | 31 January 2028 |
What expenses can sole traders claim?
Under MTD, you can claim exactly the same expenses as on your current Self Assessment return. The categories include:
Office & premises
Rent, rates, utilities, insurance
Travel
Fuel, parking, train fares, vehicle costs
Stock & materials
Raw materials, goods for resale
Professional fees
Accountant, solicitor, professional subscriptions
Marketing
Advertising, website, business cards
Staff costs
Wages, subcontractor payments, NI
Financial costs
Bank charges, interest, card fees
Equipment
Tools, computers, machinery (capital allowances)
MTDFile includes AI-powered expense categorisation that automatically sorts your expenses into the correct HMRC categories, reducing errors and saving time on each quarterly submission.
What digital records must sole traders keep?
Under MTD, you must maintain digital records of all business transactions. For sole traders, this means:
- Income records: Date, amount, and description of each sale or payment received
- Expense records: Date, amount, category, and description of each business expense
- Supporting documents: Invoices, receipts, and bank statements (these can be digital — photos of paper receipts are fine)
Spreadsheets count as digital records, but they must be linked to MTD-compatible software for submission. The simplest approach is to keep your records directly in your MTD software — MTDFile provides built-in digital record keeping, so your records and submissions are in one place.
Common concerns from sole traders
“I'm not tech-savvy — can I still comply?”
Yes. MTDFile is designed to be as simple as possible. You enter your income and expenses, and the software handles everything else — calculations, categories, and HMRC submission. If you can use online banking, you can use MTDFile.
“Will this cost me more than my current accountant?”
MTDFile starts at £9.99/month (£119.88/year). Most accountants charge £300-800/year for sole trader accounts. If you're confident with your own bookkeeping, MTDFile can replace the filing element entirely. If you prefer keeping your accountant, they can use MTDFile too.
“I'm a CIS subcontractor — am I affected?”
If you're self-employed and your income exceeds the threshold, yes. CIS deductions are recorded separately, and MTDFile supports tracking CIS payments received and tax already deducted.
Get MTD-ready before April 2026
MTDFile handles quarterly ITSA filing for sole traders — including income tracking, expense categorisation, and direct HMRC submission. From £9.99/month.