Making Tax Digital
for sole traders
If you are a sole trader, Making Tax Digital for Income Tax applies to you once your qualifying income passes the threshold for your band — over £50,000 from April 2026, over £30,000 from April 2027, and over £20,000 from April 2028. Qualifying income is your turnover before expenses, added across every sole trade and any property you let, so it catches people whose profit is well below the number.
Anyone trading in their own name rather than through a limited company — a trade, a freelance practice, a shop, a consultancy. If you file an SA103 page today, this is you.
When it starts for you
HMRC phases this in by qualifying income — your self-employment and property turnover added together, before expenses.
| Qualifying income | Mandatory from | |
|---|---|---|
| over £50,000 | 6 April 2026 | In force now. |
| over £30,000 | 6 April 2027 | The next band. |
| over £20,000 | 6 April 2028 | The widest band. |
It is turnover, not profit, and it is added across all your sole trades and property together. Someone with £18,000 of trade income and £14,000 of rent has £32,000 of qualifying income, not two figures under the threshold.
What is different for you
The parts that catch sole traders out
Turnover is the test, not profit
The threshold looks at what comes in before any expenses. A trade turning over £34,000 with £16,000 of costs has £34,000 of qualifying income, and is in from April 2027 — not out on £18,000 of profit.
Two trades still means one figure
If you run more than one sole trade, the incomes add together for the threshold test. They stay separate businesses for the quarterly updates, though, each with its own obligations.
The cash basis is the default now
For most sole traders the cash basis — income when it lands, expenses when they leave — is the default way of working out profit, and it maps cleanly onto records kept as money moves.
What actually changes
Digital records, kept as you go
Your income and expenses have to be recorded digitally rather than added up from a shoebox once a year. That is the part that changes day to day, and it is the part Revenue is built for.
Quarterly updates
Four updates a year per business, sent to HMRC from compatible software. They are running totals of income and expenses, not four mini tax returns, and no tax is due on them.
A final declaration
After the fourth quarter you finalise the year — adjustments, reliefs, anything outside the business — and declare it. This replaces the Self Assessment return you file today.
One set of books per business
HMRC treats a sole trade and a property business as separate businesses with separate obligations, even for the same person. Two income sources means two sets of quarterly updates.
Being straight with you
To be straight about where Revenue is today: it keeps your books on a real double-entry ledger and prepares the figures behind an SA return, but it does not yet send quarterly MTD for Income Tax updates to HMRC — that is in development, and our HMRC production approval is still in progress. If you are mandated now, keep your records in Revenue and file through an HMRC-recognised route until we can tell you otherwise. RepBud is designed to assist, not replace, your professional judgement.
Questions sole traders ask
I am a sole trader with a job as well. Does my salary count?
No. Salary taxed under PAYE is outside qualifying income, as are dividends and pensions. Only your self-employment and property income count towards the threshold — though your employment income still goes on your final declaration at the end of the year.
When do sole traders have to start using Making Tax Digital?
It depends on turnover, not trade. If your qualifying income — self-employment and property added together, before expenses — was over £50,000 you are already in, from 6 April 2026. Over £30,000 brings you in from 6 April 2027, and over £20,000 from 6 April 2028. HMRC works this out from the return you have already filed, and writes to you.
Does this mean four tax bills a year?
No. A quarterly update is a running total of your income and expenses, sent from your software. There is no tax calculation attached to it and nothing to pay. Your tax stays due on the same dates it is now — the payment deadlines have not changed.
What if I am under the threshold?
Then you carry on filing Self Assessment as you do now, and nothing changes for you yet. It is worth knowing where you sit relative to the £20,000 band coming in April 2028, because qualifying income is turnover rather than profit and it catches more people than expected.
Can my accountant do it for me?
Yes. An agent can send quarterly updates on your behalf, and most people who use an accountant today will carry on the same way. What changes is that the records behind those updates have to be kept digitally through the year rather than assembled at the end of it — which is the half you can get ready now.
Also covered
Thresholds and dates are HMRC’s, checked August 2026. This is general information about the regime, not tax advice for your circumstances.