How to Prepare for Making Tax Digital as a Sole Trader
Making Tax Digital for Income Tax is live from 6 April 2026 for sole traders earning over £50,000. If that’s you and you haven’t acted yet, you’re already behind. If you’re under £50,000, you’ve got until April 2027 or 2028 – but getting set up now means the deadline doesn’t sneak up on you. Here’s exactly what to do, in order.
Work out if MTD applies to you – and when
Pull up your 2024/25 Self Assessment return and look at your gross turnover from self-employment – that’s revenue before expenses, not profit.
- Over £50,000: MTD applies from 6 April 2026
- £30,000–£50,000: MTD applies from April 2027
- £20,000–£30,000: MTD applies from April 2028
If you have both self-employment income and rental income from property, HMRC adds them together to determine your threshold. A tradesperson turning over £35,000 plus £20,000 from a rental has qualifying income of £55,000 – which puts them in the first wave from April 2026. Limited companies are not affected by MTD for Income Tax.
Open a dedicated business bank account
If you’re running business and personal spending through the same account, MTD is the perfect reason to fix that now. A separate business bank account means your bank feed only pulls in business transactions – no manually separating personal spending every quarter.
Tip: Mettle (by NatWest) is worth considering specifically because it comes with FreeAgent bundled in for free – which sorts your MTD software at the same time. Most business bank accounts take about 10 minutes to open online.
Choose your MTD-compatible software
You cannot submit MTD quarterly updates through HMRC’s basic online portal. You need software on HMRC’s recognised list. The main options for tradespeople are Xero, FreeAgent, QuickBooks, and Sage – covered in detail in our guide to the best MTD-compatible software for UK tradespeople.
The quickest way to choose: ask your accountant which platform they use. If they’re on Xero, use Xero. Working on the same platform means they can review your records directly before each quarterly submission. If you don’t have an accountant and bank with NatWest or RBS, FreeAgent is available free.
Connect your bank feed
Once your software is set up, connect your business bank account. This pulls every transaction in automatically – every payment in and every cost out appears in the software without manual entry. Your job becomes categorising transactions as they arrive rather than reconstructing everything at year end. Most major UK banks connect directly to Xero, FreeAgent, and QuickBooks in about five minutes.
Set up digital receipt capture
Under MTD your records must be kept digitally – paper receipts stuffed in a glovebox don’t count. The practical solution: photograph every receipt immediately using your accounting software’s mobile app. FreeAgent and QuickBooks have strong receipt capture on mobile. The habit is simple: spend on something for the business, photograph the receipt immediately. About 10 seconds per receipt and you never lose an expense again.
Materials, fuel, tools, PPE, vehicle costs, phone bills – all claimable, all needing a digital record. Tradespeople who switch to digital capture consistently find they’ve been missing hundreds or thousands in claimable expenses through lost paper receipts.
Register for MTD with HMRC
Once your software is set up, register for MTD for Income Tax through your HMRC Government Gateway account and link your software to HMRC’s systems. Your software will guide you through this – it’s usually a case of logging into your Government Gateway account within the software and authorising the connection. If you work with an accountant, they can handle the registration on your behalf.
Understand the quarterly update cycle
The four quarterly deadlines for the 2026/27 tax year are:
- 7 August 2026 – Quarter 1 (6 April to 5 July)
- 7 November 2026 – Quarter 2 (6 July to 5 October)
- 7 February 2027 – Quarter 3 (6 October to 5 January)
- 7 May 2027 – Quarter 4 (6 January to 5 April)
A quarterly update isn’t a tax return – it’s a summary of your income and expenses from your digital records that HMRC uses to keep a running view of your business. HMRC has confirmed no penalty points for late quarterly updates in the first year, but the final declaration deadline of 31 January 2028 still applies.
Keep records updated weekly, not quarterly
The biggest trap with MTD is treating quarterly updates like a mini version of the old January panic – leaving everything until the week before the deadline. Set aside 15 minutes once a week to review what’s come in through the bank feed, photograph any receipts, and log any mileage. Done consistently, each quarterly update takes about 20 minutes to review and submit. Leave it for three months and it’s a two-hour catch-up job every quarter. Friday afternoon works well for most tradespeople – end of the working week, while the week’s jobs are still fresh.
How Tradify Supports Your MTD Setup
Every invoice you raise in Tradify flows directly into your accounting software via integration – meaning your sales income is automatically recorded without double entry. Job costs and materials can be logged against each job in Tradify and pushed through to your accounts the same way. For a tradesperson using Tradify alongside Xero or FreeAgent, a large proportion of MTD record-keeping happens automatically as part of normal day-to-day work.
Try Tradify Free →MTD Preparation Checklist
Work through this before your MTD start date
- Confirmed qualifying income and MTD start date
- Separate business bank account open
- MTD-compatible software chosen and set up
- Bank feed connected
- Mobile receipt capture working
- Registered for MTD with HMRC via Government Gateway
- Accountant has agent authorisation if applicable
- Quarterly deadline dates in the calendar
- Weekly 15-minute admin habit in the diary
Frequently Asked Questions
From 6 April 2026 for sole traders (and landlords) with qualifying income over £50,000. Those with income between £30,000 and £50,000 must comply from April 2027. Those earning between £20,000 and £30,000 from April 2028. Qualifying income includes both self-employment turnover and rental income combined – HMRC adds both together to determine your threshold. Limited companies are not affected by MTD for Income Tax (a separate regime applies to corporation tax).
The one-time setup takes a few hours spread across two to three days: choosing and setting up software (30–60 minutes), opening a business bank account if you don’t have one (10–15 minutes), connecting your bank feed (5 minutes), and registering with HMRC via Government Gateway (15–30 minutes). Once it’s done, the ongoing commitment is about 15 minutes per week and 20 minutes per quarterly update. The setup is a one-time job – the weekly habit is what makes the quarterly deadlines manageable.
HMRC has confirmed there will be no penalty points for late quarterly updates in the first year of MTD for Income Tax (2026/27). After that, the late submission penalty points system applies – similar to the existing VAT MTD penalties. The final declaration deadline (31 January following the end of the tax year) and late payment penalties remain in force regardless. If you work with an accountant, agent authorisation means they can submit quarterly updates on your behalf so you’re never relying on remembering the deadlines yourself.
HMRC doesn’t legally require a separate business bank account for MTD – but it’s strongly recommended in practice. If all your business and personal spending goes through the same account, you’ll need to manually identify and exclude personal transactions from your MTD records every quarter. A dedicated business account means your bank feed pulls in only business transactions, making quarterly updates significantly quicker and reducing the risk of errors. Opening a business account takes about 10 minutes online with most providers.
Yes – MTD is designed to be manageable without an accountant if your finances are straightforward. Once your software is connected to your bank feed and HMRC, the quarterly update is largely automated: the software compiles your income and expense summary from your digital records and submits it with a few clicks. The final annual declaration where you reconcile everything and calculate your actual tax liability is where an accountant adds the most value. Many sole trader tradespeople handle quarterly updates themselves and use an accountant only for the final declaration.
This guide is for informational purposes only and does not constitute financial or tax advice. Consult a qualified accountant for advice specific to your situation. Some links on this page are affiliate links; if you sign up through them we may earn a commission at no extra cost to you.