☕ Accounting Espresso #6 — Making Tax Digital: What Sole Traders Need to Know Before April 2026

If you're a sole trader earning over £50,000, HMRC has almost certainly already written to you. And if you haven't opened that letter yet, now is the time.

Making Tax Digital for Income Tax (MTD for IT) is not a future problem. It becomes mandatory from 6 April 2026 for sole traders and landlords with gross income over £90,000. The way you report your income to HMRC is about to change significantly.

What is actually changing

Until now, you've submitted one Self Assessment tax return per year. Under MTD, that changes completely. From April 2026 you will need to:

•       keep digital records of all income and expenses using HMRC-compatible software

•       submit quarterly updates to HMRC (not replacing your annual return, but in addition to it)

•       submit a final declaration by 31 January of the following year

Your first quarterly update will be due by 7 August 2026, covering the period from 6 April to 5 July 2026.

Who does this affect right now

April 2026: gross income over £50,000

April 2027: gross income over £30,000

April 2028: gross income over £20,000

Qualifying income means your total gross income from self-employment and property before expenses. It does not include salary, pensions, dividends or interest.

The soft landing you shouldn't rely on

HMRC is waiving penalty points for late quarterly submissions in the first year, but the obligation to submit is still there from day one. This is not a free pass — it is simply a transition period.

What you need to do now

Sign-up is not automatic. HMRC will write to affected taxpayers, but you must register yourself via GOV.UK. Here is what to do:

•       Check whether your 2024/25 gross income exceeds £50,000

•       Choose HMRC-compatible software such as QuickBooks, Xero or FreeAgent

•       Begin keeping digital records now, before April 2026

•       Sign up via GOV.UK once you receive your invitation letter

•       Make sure there are digital links between your records and submissions — manual re-entry of data is not permitted

The bottom line

MTD is not going away and the threshold will keep dropping. If you are anywhere near £50,000 in gross income, it makes sense to start preparing now rather than scrambling in March 2026.

Not sure where to start? Book a free discovery call at onthedot.online/contact and we will walk you through it.