Making Tax Digital for Sole Traders: 5 Easy Steps to Stay Compliant in 2026
Keep your records organised, meet HMRC requirements, and manage your business finances with confidence.
Making Tax Digital for Income Tax is now a reality for many sole traders. The first phase went live on 6 April 2026, and the first quarterly update deadline passed on 7 August 2026.
From September 2026, HMRC is also automatically signing up sole traders and landlords who need to use the service but have not registered themselves. If you have received a letter or message from HMRC, there is no need to panic. The process can be managed with the right records, compatible software, and dependable support.
This guide explains five practical steps to help you stay compliant in 2026.
What Is Making Tax Digital For Income Tax?
Making Tax Digital for Income Tax, often called MTD or MTD ITSA, is a new way for eligible sole traders and landlords to report income and expenses to HMRC.
You must use compatible software to:
- Keep digital records of your income and expenses.
- Send quarterly updates to HMRC.
- Submit your tax return.
- Report other relevant income.
- Pay your tax bill by the usual deadline.
Quarterly updates are summaries of your income and expenses. They are not tax returns. You will still need to submit a final tax return after the end of the tax year.
For the 2026 to 2027 tax year, the quarterly update deadlines are:
| Period | Deadline |
|---|---|
| 6 April to 5 July 2026 | 7 August 2026 |
| 6 July to 5 October 2026 | 7 November 2026 |
| 6 October 2026 to 5 January 2027 | 7 February 2027 |
| 6 January to 5 April 2027 | 7 May 2027 |
The first deadline has passed. If you have not yet sent your first update, you should catch up as soon as possible.
Who Needs To Use MTD In 2026?
The first phase applies to sole traders and landlords with qualifying income above £50,000.
For the 2026 to 2027 tax year, HMRC is using qualifying income from your 2024 to 2025 Self Assessment tax return. Qualifying income means your total income from self-employment and property before expenses. This is also known as turnover.
You may need to use MTD if:
- You are registered for Self Assessment.
- You receive income from self-employment, property, or both.
- Your qualifying income was more than £50,000 for the relevant tax year.
- You are not covered by an exemption.
The threshold will reduce over time. HMRC guidance states that people with qualifying income above £30,000 for the 2025 to 2026 tax year will need to use MTD from April 2027. Those with qualifying income above £20,000 for the 2026 to 2027 tax year will need to use it from April 2028.
If you are uncertain, use HMRC’s online eligibility guidance or ask an accountant to review your position.
Step 1: Check Your MTD Requirement
Start by confirming whether you need to use Making Tax Digital for Income Tax.
Review your previous Self Assessment tax return and calculate your qualifying income. Remember to include income from all relevant self-employment and property sources. If you operate more than one business, you may need to consider each income source as part of your overall position.
You should also check whether your circumstances have changed. For example, you may have:
- Started a new business.
- Stopped trading.
- Added a property income source.
- Changed your business structure.
- Become eligible for an exemption.
HMRC may have used information from an earlier tax return when deciding whether to sign you up. This information may not reflect your current circumstances.
If all your relevant self-employment or property income sources stopped before 6 April 2026, you may not need to use MTD for the 2026 to 2027 tax year. You should contact HMRC if its records are incorrect.
You can use HMRC’s check when you need to use Making Tax Digital service to review your position.
Step 2: Choose Compatible Accounting Software
Are you still managing your records with spreadsheets, paper receipts, or a mixture of different systems?
You will need software that works with Making Tax Digital for Income Tax. HMRC does not provide the software, so you need to choose a suitable option for your business.
The right software should help you:
- Record income and expenses accurately.
- Store digital financial records.
- Connect to your bank account where appropriate.
- Track your business performance.
- Prepare quarterly updates.
- Keep information accessible throughout the year.
Consider the size and complexity of your business before choosing a product. A simple business may only need straightforward income and expense tracking. A growing business may benefit from bank feeds, invoice management, VAT support, payroll integration, and real-time financial reports.
HMRC provides guidance on how to choose compatible software. You can also ask S&G Advisory for help with cloud accounting setup and training. We can help you choose a practical system, configure it correctly, and understand how to use it.
Step 3: Sign Up And Check Your HMRC Records
If you have not signed up already, you can register for Making Tax Digital through GOV.UK. You will need to be registered for Self Assessment and have submitted a tax return in the last two years.
HMRC is automatically signing up eligible sole traders and landlords from September 2026. If HMRC has contacted you, sign in to your online account and check the details carefully.
Pay particular attention to:
- Your business name and address.
- Your self-employment income sources.
- Any UK or overseas property income.
- Income sources that have stopped.
- The date you need to start using MTD.
- Any overdue quarterly updates.
If the information is incorrect, update it or contact HMRC. Do not assume that an automatic sign-up means every detail is current.
You can also ask an authorised accountant to act on your behalf. S&G Advisory can provide practical support with the sign-up process, software connection, digital records, and ongoing reporting.
Step 4: Create Digital Records And Send Quarterly Updates
Once your software is ready, enter your business income and expenses from the start of the relevant tax year.
Your records should be accurate, complete, and updated regularly. Waiting until a quarterly deadline is close can make the process more stressful and increase the risk of missing transactions.
A simple monthly routine can help. Set aside time to:
- Upload or record sales income.
- Categorise business expenses.
- Reconcile your bank account.
- Check unpaid invoices.
- Store receipts and supporting documents.
- Review unusual or missing transactions.
At the end of each quarterly period, your software will help you prepare a summary of your income and expenses. You or your authorised agent then sends the update to HMRC.
If your first quarterly update is late, send it as soon as possible. HMRC has confirmed that penalty points will not apply for late quarterly updates during the first 2026 to 2027 tax year. However, this does not remove the need to keep digital records or send the updates.
Late Self Assessment returns and late tax payments can still result in penalties. Reliable record keeping remains important.
Step 5: Keep Up With Deadlines And Complete Your Final Return
MTD does not remove your annual tax responsibilities.
After the end of the tax year, you will need to complete the final reporting process, including your final quarterly update, End of Period Statement, and final tax declaration where required. Your final tax return will also include other income sources that are not part of your quarterly updates.
Your tax bill will still normally be due by 31 January following the end of the tax year. For the 2026 to 2027 tax year, the usual payment deadline will be 31 January 2028.
Keeping your records up to date throughout the year makes this final process much easier. It also gives you clearer information about your profit, tax position, cash flow, and business performance.
How S&G Advisory Can Support Your MTD Compliance
Are you unsure whether your software is ready, your records are complete, or your first update has been submitted correctly?
S&G Advisory provides tailored support for sole traders and growing businesses. We can help you:
- Check whether MTD applies to your business.
- Choose and set up compatible cloud accounting software.
- Organise your digital records.
- Review income and expense information.
- Prepare quarterly updates.
- Support Self Assessment tax filings.
- Maintain accurate financial reports.
- Keep your business information accessible and up to date.
Our bookkeeping and accounting services are designed to simplify financial administration and provide dependable ongoing support. Our Edge Package includes VAT returns and MTD compliance, while cloud accounting support can help you manage your records with greater efficiency.
With more than five years of accounting knowledge, S&G Advisory offers accurate administration, personalised guidance, and a practical approach to compliance.
Get Support With Making Tax Digital
Making Tax Digital may feel like a significant change, but you do not need to manage it alone. The key is to check your position, use suitable software, maintain accurate records, and keep up with each reporting deadline.
If HMRC has automatically signed you up, review your information promptly and deal with any overdue updates. If you are not sure what to do next, S&G Advisory can provide reliable support and help you move forward with confidence.
Contact S&G Advisory for personalised guidance on MTD, bookkeeping, cloud accounting, and Self Assessment support.