Making Tax Digital for Sole Traders: What Changes in 2026?

If you're a sole trader in the UK, Making Tax Digital for Income Tax is no longer something happening somewhere over the horizon. It's here.

From 6 April 2026, Making Tax Digital (MTD) for Income Tax became mandatory for sole traders and landlords with qualifying income of more than £50,000 from self-employment and property. (GOV.UK)

Instead of keeping your records and dealing with HMRC through the traditional annual Self Assessment process alone, you'll now need to keep digital records, use compatible software and send quarterly updates to HMRC.
 

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC's move towards a more digital way of managing Income Tax.

For sole traders and landlords who are within the MTD rules, you'll need to:

• Keep digital records of your business or property income and expenses
• Use software that is compatible with Making Tax Digital
• Send quarterly updates to HMRC
• Complete an end-of-year process
• Continue to submit your annual tax return and pay the tax you owe

The important point is that quarterly updates are not four separate tax returns.

They are summaries of your income and expenses for the relevant period. Your final tax position is still dealt with through the end-of-year process and annual tax return. (GOV.UK)

So, while the way you record and report your information is changing, your overall tax responsibilities haven't simply disappeared.

Who needs to use Making Tax Digital in 2026?

This is probably the biggest question for sole traders right now.

From 6 April 2026, you need to use Making Tax Digital for Income Tax if:

1. You're an individual registered for Self Assessment.
2. You receive income from self-employment, property, or both.
3. Your qualifying income is more than £50,000.

For the first phase, HMRC looks at your 2024/25 tax return to determine whether your qualifying income exceeded £50,000. (GOV.UK)

What counts as qualifying income?

For MTD purposes, qualifying income is based on your total turnover from self-employment and property income, before expenses.

That means it's important not to look only at your taxable profit when deciding whether you fall within the rules. (GOV.UK)

If you're unsure whether your income puts you within the MTD rules, it's worth checking before assuming you're either included or excluded.

The Making Tax Digital thresholds are changing

One reason sole traders shouldn't treat 2026 as a one-off change is that the threshold is being reduced in stages.

HMRC has confirmed this phased rollout. (GOV.UK)

So even if you're not required to use MTD in 2026, you may be brought into the system in a future year.

That makes 2026 a useful time to get your bookkeeping and accounting processes in shape rather than waiting until HMRC's next threshold catches up with you.

What Changes for Sole Traders?

If Making Tax Digital applies to you, there are three main changes.

1. Keep Digital Records

You must keep digital records using MTD-compatible software. You can continue using spreadsheets if they are connected to HMRC through compatible bridging software. 

2. Send Quarterly Updates to HMRC

You will need to submit summaries of your income and expenses through compatible software.

For the 2026/27 tax year, the standard quarterly deadlines are:

• 7 August 2026
• 7 November 2026
• 7 February 2027
• 7 May 2027

Quarterly updates are not separate tax returns and do not mean you pay tax four times a year.

3. Complete Your Annual Tax Return

Making Tax Digital does not remove the annual tax return. You will still need to complete your year-end tax reporting and pay any tax due by the normal deadline.

For the 2026/27 tax year, the tax return deadline is 31 January 2028.

What Should Sole Traders Do Now? If MTD applies to you: Check your qualifying income to confirm whether you need to use MTD. Get your bookkeeping up to date and make sure your income and expenses are recorded accurately. Choose MTD-compatible software or suitable bridging software if you use spreadsheets. Keep your digital records up to date so you are ready for quarterly submissions. Consider using an accountant to help with your records, software and MTD submissions.

Need help getting ready for Making Tax Digital?

At 4 Future Accountancy, we help sole traders, freelancers, contractors and growing businesses manage their accounting, tax and financial responsibilities with clear, straightforward support.

From bookkeeping and Self Assessment to tax planning and Making Tax Digital preparation, our aim is simple: help you understand your numbers, stay organised and make better decisions for the future.

If you're unsure whether Making Tax Digital applies to you, what you need to do next, or how to get your records ready, get in touch with 4 Future Accountancy for a personalized quote.