MTD for sole traders
Making Tax Digital for sole traders means keeping your books in software and sending HMRC a summary of your takings and costs every three months, then finishing the year with a tax return. It has applied since 6 April 2026 to anyone whose gross self-employed sales, plus any rent, topped £50,000. The limit drops to £30,000 in 2027 and £20,000 in 2028.
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MTD for sole traders: Your 2026/27 Guide
By Oroni Chowdhury · Reviewed by Shamayun Chowdhury, CIMA · Tax year 2026/27 · Last reviewed [9/24/2026]
Quick answer
Making Tax Digital for sole traders means keeping your books in software and sending HMRC a summary of your takings and costs every three months, then finishing the year with a tax return. It has applied since 6 April 2026 to anyone whose gross self-employed sales, plus any rent, topped £50,000. The limit drops to £30,000 in 2027 and £20,000 in 2028.
On this page
- Does Making Tax Digital apply to sole traders?
- What does Making Tax Digital mean for the self-employed?
- Cash basis, expenses and your quarterly figures
- Two trades, a job, or a side hustle
- Making Tax Digital for childminders and home-based trades
- How to stay compliant with MTD as a sole trader
- Help from MTDFix
- Sole trader FAQs
Does Making Tax Digital apply to sole traders?
Yes, once your gross income passes the limit for the year. Sole traders making Making Tax Digital work in practice are the biggest single group inside the scheme, because the sole trader Making Tax Digital test uses sales rather than profit. Nothing about your trade, industry or company status changes that: a self-employed plasterer, a driver, a tutor and an online seller are all judged the same way.
| Tax return HMRC checks | Gross sales + rent above | Making Tax Digital sole trader start |
|---|---|---|
| 2024/25 | £50,000 | 6 April 2026 |
| 2025/26 | £30,000 | 6 April 2027 |
| 2026/27 | £20,000 | 6 April 2028 |
Do sole traders have to make tax digital if the business barely breaks even? Yes, where the sales figure is over the line. HMRC never looks at what you kept. Full detail on the test sits on our page about Making Tax Digital thresholds.
The make tax digital self employed rules, and the make tax digital sole trader rules behind them, are the same thing. Making tax digital self employed HMRC guidance also catches people who think of their trade as casual: weekend market traders, delivery drivers, exam invigilators, anyone invoicing steadily under their own name.
What does Making Tax Digital mean for the self-employed?
Strip away the jargon and what is Making Tax Digital for self employed people? One annual job, broken into five smaller ones. Here is the shape of the change:
| Before | Under MTD |
|---|---|
| Receipts in a box, sorted each January | Income and costs logged in software as you go |
| One tax return | Four quarterly updates, then the return |
| Filed on HMRC’s website | Filed through compatible software |
| Tax bill known in January | Running estimate through the year |
What does Making Tax Digital mean for self employed people financially? Very little. Your tax rates, allowances and the expenses you can claim are untouched. Making tax digital for income tax self employed reporting changes the timing and the tools, not the bill. Our page on MTD for Income Tax sets out the full year.
Cash basis, expenses and your quarterly figures
Since 2024/25 the cash basis has been the default for sole traders, so unless you elect for traditional accounting, you count money when it lands in your account and when it leaves. That fits quarterly reporting neatly, because your updates track what actually moved.
Each update groups your costs into HMRC’s categories. Two habits make that painless:
- Keep business money separate. A dedicated account, or at least a card used only for the trade, saves hours of sorting.
- Photograph receipts at the time. Most software reads the amount and date for you, and the record is then digital from the start.
Watch one trap in particular: entering a van, a laptop or major tools as an everyday cost. Capital purchases are treated differently, and a miscoded one distorts every figure that follows.
Two trades, a job, or a side hustle
Each separate trade gets its own quarterly update. A photographer who also sells prints online runs two businesses in HMRC’s eyes, so that means eight updates a year plus the return. They share one deadline each quarter, so the calendar stays simple.
Employment alongside self-employment changes nothing about the test. Your wages are ignored when HMRC measures your income, though they still appear on your tax return at the end of the year.
Illustrative example
Ben drives for a courier firm four days a week as a sole trader, invoicing £34,000, and does weekend gardening work billed at £9,000. He also has a part-time warehouse job. His salary is ignored, but the two trades combine to £43,000, so his 2025/26 return puts him inside Making Tax Digital from 6 April 2027, with an update for each trade every quarter. Figures are invented to explain the rule.
Paid under CIS? Use what you invoiced before the contractor’s deduction. The deduction still reduces your tax bill in the usual way, but it does not shrink your qualifying income.
Making Tax Digital for childminders and home-based trades
Childminders, and anyone else trading from home, are treated as ordinary sole traders here. Making Tax Digital for childminders therefore turns on the same figure: total fees received from parents, before any expenses.
The wrinkle is household costs. Heating, electricity, food and wear on your home are shared between family life and the business, so the business share needs a sensible, consistent method you can explain. Whichever method you use, apply it every quarter rather than working it out once a year, or your in-year figures will drift.
Sole traders making Making Tax Digital returns from a kitchen table are common, and sole traders making tax digital work at home face the same questions. The same applies to other home-based trades: hairdressers with a room at home, bakers, dog groomers, tutors and repairers.
How to stay compliant with MTD as a sole trader
Six habits keep you on the right side of the rules with the least effort.
- Diary the five dates now: 7 August, 7 November, 7 February, 7 May, then 31 January for the return.
- Record weekly, not quarterly. Twenty minutes a week beats a lost Sunday before each deadline.
- Reconcile your bank feed every month, so nothing is missing when the update is due.
- Personal purchases belong on your own card, never the business one.
- Send the update even if the figures are rough. Corrections carry into the next quarter, and a late submission is the thing that costs you.
- Check the money you owe as you go, using your software’s running estimate, and set aside a percentage each month.
Miss one this year and there is some slack: no penalty points apply to late quarterly updates during 2026/27. From April 2027 each miss counts, so the habits are worth forming now.
Help from MTDFix
Self employed Making Tax Digital work is perfectly doable alone, given time and a tidy system. If you would rather spend that time earning, MTDFix runs the whole cycle for sole traders across the UK: sign-up, software, records built from your paperwork, every update filed as your HMRC agent, and your tax return at the end.
Sole trader inside MTD
£15 a month
- Software set up and included
- Records kept from your receipts
- Four quarterly updates filed
- Year-end tax return
Not over the limit yet
£7.50 a month
- Annual Self Assessment return
- Expenses reviewed
- We flag the year you join
Prefer to talk it through first? Speak to a Making Tax Digital accountant at MTDFix.
Find out when your trade joins MTD
Tell us your sales figure and whether you have rental income. You will get your start date and a fixed monthly price, with nothing to sign first.
📞 0116 403 0595 | 📧 mtdfix@yahoo.com | 🌐 mtdfix.com
MTDFix, 6 Egginton Street, Leicester, LE5 5BA · Working with sole traders UK-wide
Sole trader FAQs
Do I have to make tax digital as a sole trader if I already file online?
Yes. Filing on HMRC’s website is not the same thing. Once you are in, records must be kept digitally and everything goes through compatible software, including the year-end return.
I closed my business mid-year. What happens?
You report the period you traded and tell HMRC the business has ceased. Updates stop after that, and the final year is settled through your tax return as usual.
I started trading this year. Am I in straight away?
Usually not. HMRC works from a filed return, so a brand-new sole trader joins once a return shows income over the limit, from the following 6 April.
Can I keep using my spreadsheet?
Only with bridging software linking it to HMRC, and the figures must move across digitally rather than being retyped.
Does the £1,000 trading allowance keep me under the threshold?
No. It reduces the profit you pay tax on, not the gross sales figure HMRC measures against the limit.
Will I pay tax every quarter now?
No. The updates are reports. Nothing moves on the payment side: 31 January stands, with 31 July added if payments on account are due.
A general guide to the 2026/27 rules for self-employed people, not advice for your own circumstances. Speak to an accountant if your trade is unusual.
About the author
Written by Marina Jahan · Reviewed by Shamayun Chowdhury
Written by Oroni Chowdhury, Eternity Accountants.
Reviewed by Shamayun Chowdhury, Senior Accountant at Major Accountancy and Lecturer in Accounting at Nottingham Trent University. CIMA qualified. Based in Leicester, England.
- CIMA qualified accountant with 15+ years of UK practice experience
- Lecturer in Accounting, Nottingham Trent University
- Senior Accountant at Major Accountancy, Leicester
- 500+ UK businesses supported across Self Assessment, Corporation Tax, VAT, and MTD compliance
- LinkedIn: Shamayun Chowdhury on LinkedIn
- Facebook: Shamayun Chowdhury on Facebook
Last reviewed: [9/24/2026]