MTD for Sole Traders

What does Making Tax Digital mean for the self-employed?

Making Tax Digital (MTD) is a significant change to reporting by HMRC to streamline the UK tax system and close the tax gap. MTD for Income Tax Self Assessment (ITSA) is the latest installment in the phased approach of the initiative and will become mandatory for sole traders and landlords in 2026. Under the MTD for ITSA reporting rules sole traders who turnover a certain amount per year will be obligated to submit quarterly filings to HMRC in addition to the usual Self Assessment Tax Return following the end of the tax year.

If you are a sole trader it is prudent to start preparing for MTD in advance of its implementation by getting to grips with cloud accounting software and understanding the new regulations. At Sherwin Currid we are preparing our clients for MTD for ITSA by providing advice on the new rules as well as assisting in setting up and operating compliant software. Get in touch with us to discuss how we can help you prepare for MTD as well as streamlining your tax and compliance work to give you more time to spend working on your business.

When is the start date of MTD for ITSA?

The first phase of MTD for ITSA will start in 2026. From the 6th April 2026 individuals with property income or sole trade businesses that turnover more than £50,000 will need to be registered for MTD and begin filing under the new system. Individuals earning over £30,000 will have to register by the 6th April 2027.

If your rental or sole trade business income is under these thresholds then there are currently no plans for you to need to register for MTD although the government are keeping this under review and may introduce lower thresholds in the future. You can still voluntarily register for MTD for ITSA even if you do not meet the income thresholds.

Why Choose Sherwin Currid to get you ready for MTD for ITSA

Sherwin Currid offers friendly expertise in preparing sole traders for MTD for ITSA. Our team of sole trader accountants are experts with MTD compliant accounting software and can offer you guidance in choosing and setting up the right software for you. We also provide a wide range of other accountancy services to ensure that you are operating your sole trade as tax efficiently as possible. All of our clients are given a dedicated accountant who will take the time to understand your business and be on hand to answer any questions you may have for them. We pride ourselves on a friendly service for a wide range of sole traders and are happy to help you with your accounting and tax needs. Get in touch with us to discuss how Sherwin Currid can help you prepare for MTD.

Helping sole traders smoothly transition to MTD

Navigating the complexities of MTD compliance and tax planning can be daunting for sole traders. At Sherwin Currid we endeavour to reduce the burden of your compliance work so that you can spend more time focused on serving your own clients and customers. We have already overseen many of our clients, both limited companies and sole traders, in transitioning to MTD for VAT returns and are ideally suited to helping you understand MTD for ITSA.

We are experts with a wide range of accounting software such as FreeAgent, Xero and Quickbooks and can advise you on what software is the best fit for you and your business. Your dedicated accountant will introduce you to one these digital tools and offer unlimited advice on raising invoices, uploading receipts and understanding the various functions that may help you. We also offer limited company incorporation services and can help you transition to operating through a limited company as it may be efficient for you to do so.

Our experience and expertise in supporting sole traders

Since we started over 15 years ago we have provided comprehensive advice to sole traders from a wide range of industries. Our core aim is to simplify accountancy and tax for small businesses and individuals by providing personal, friendly support at affordable prices. For sole traders we offer a range of services and are happy to have a free consultation with you by phone, on Zoom/Teams or in person at one of our local offices.

Cloud accounting for sole traders

MTD for ITSA requires sole traders to file quarterly returns thorough HMRC approved software. Making sure you use the right software is vital to ensuring compliance with the reporting rules, so choosing simple and affordable software products is crucial for sole traders preparing for MTD. We work with various software providers to ensure our team are experts in the best digital record keeping software available, allowing us to give informed advice on choosing and operating your cloud accounting software.

MTD compliant software

MTD compliant software for sole traders will allow you to digitally submit your quarterly filings to HMRC as well as providing real time insights into the cash flow of your business and your personal tax position throughout the year. Our accountants will be able to see your live data, allowing us to provide up to date advice and ensure your compliance filings are accurate. By finding a suitable, compatible software you can efficiently manage your income tax self-assessment obligations.

Some of the software providers we use are:

FreeAgent

Xero

Quickbooks

What are the MTD for Income Tax rules for self-employed sole traders?

MTD for Income Tax rules for self-employed sole traders apply to individuals with turnover in excess of £50,000 from the 6th April 2026 and those with turnover exceeding £30,000 from 6th April 2027. Under the new legislation you will be required to keep digital accounting records and provide quarterly updates and an annual final declaration. While the frequency of submissions will increase the payment of your tax bill will not change with the current system of payments on account and a balancing payment on the 31st January following the tax year expected to remain.

Digital record keeping requirements

Ensuring accurate digital record keeping is crucial under MTD for sole traders. Records must be maintained digitally using software compatible with HMRC’s specifications. You will need to track all incoming payments and expenses by keeping a log of your invoices and receipts digitally that must be preserved for, at least, five years after the end of the year. Once registered for MTD for ITSA the quarterly submission deadlines are:

• Quarter 1 – 6th April to 5th July – Deadline of 5th August
• Quarter 2 – 6th July to 5th October – Deadline of 5th November
• Quarter 3 – 6th October to 5th January – Deadline of 5th February
• Quarter 4 – 6th January to 5th April – Deadline of 5th May

Your quarterly submissions are based off the tax year, not your business’s accounting period, although you may apply for a “calendar quarter election” which allows you to submit quarterly updates based off the end of the previous month.

Quarterly update requirements

To stay compliant with MTD for ITSA, self-employed sole traders must provide quarterly updates of their income to HMRC. Sherwin Currid can help you compile these updates in your cloud accounting software to ensure accurate filings as well as streamlining your tax liability. Failure to meet these quarterly update requirements may result in penalties, emphasising the importance of timely and accurate reporting for sole traders under MTD.

Final declaration

Sole traders must make a final declaration each year under MTD for ITSA. This declaration confirms their total income tax liability for the year by combining information from MTD sources of income, such as your sole trade, and non-MTD sources of income such as dividends, PAYE income, allowances and reliefs to determine your taxable income. This final declaration will be due on the 31st January, the same as the normal self assessment deadline.

Frequently Asked Questions