Making Tax Digital Set to Impact Sole Traders from April 2026

Making Tax Digital Set to Impact Sole Traders from April 2026

Sole traders – particularly those with income over £50,000 – should take note: from April 2026, the government’s Making Tax Digital (MTD) for Income Tax rules will come into force. These changes mark a significant shift in how your income tax information is recorded and reported.

In this article, we outline what’s changing, who’s affected, and what you should be doing now to prepare – so you stay compliant and in control.

What’s changing?

The MTD for Income Tax rules are part of HMRC’s broader digital transformation, with the aim of making the tax system more efficient, effective, and easier to get right.

Under the new rules, self-employed individuals and landlords earning over £50,000 per year will need to:

• Keep digital records of income and expenses

• Use MTD-compatible software to submit quarterly updates to HMRC

• File a final end-of-year statement, replacing the current Self Assessment tax return

This new approach will provide a more up-to-date picture of your tax position throughout the year, but it will also introduce new processes and potentially new costs.

When does it apply?

The rollout is being phased in over three years, depending on your income level:

• 6 April 2026: If your total annual business or property income exceeds £50,000

• 6 April 2027: If your total income is between £30,000 and £50,000

• 6 April 2028 (expected): If your income is between £20,000 and £30,000 (subject to confirmation)

Each group will be required to follow the same MTD process from their applicable start date.

Why this matters

While the intention behind MTD is to make things more efficient in the long run, the initial setup could involve significant changes to how you manage your accounts.

You’ll need to:

• Invest in MTD-compliant software (if you’re not already using it)

• Get to grips with more frequent reporting

• Budget for quarterly tax updates, not just annual ones

This could feel like an additional burden at first – especially for smaller or time-stretched businesses. However, with the right support and tools, the transition can be managed smoothly.

As Jon Martingale, Head of Product Management at accounting software firm FreeAgent, explains:

“By requiring regular quarterly updates, MTD encourages businesses to maintain up-to-date financial records, which leads to a clearer, more current understanding of their financial position. This regular insight helps business owners spot growth opportunities, performance issues or overspending early, allowing for more informed decision-making and better cash flow management.”

What you should do now

Don’t wait until the last minute. Even though the 2026 deadline may seem a while away, early preparation will ease the transition.

Here are some steps we recommend:

• Check if and when you’ll be affected, based on your income

• Explore compatible accounting software – some providers already offer MTD-ready solutions

• Consider joining the HMRC pilot programme to familiarise yourself with the new process ahead of time

• Speak to your accountant – we’re here to guide you through every step and ensure your systems are fit for purpose

Final thoughts

Making Tax Digital for Income Tax is coming – and while the change may feel disruptive at first, early action can help you avoid compliance issues and make the most of the benefits in the long term.

If you’re unsure how this affects you, or if you need help choosing the right software, get in touch with the team at IN Accountancy – we’re always happy to help, and check out our YouTube Channel for more tax tips!

We’ve also actually created a Making Tax Digital Guide which you can access for free here.