Your Guide to Making Tax Digital for Sole Traders (April 2026)

Introduction: What is Making Tax Digital?

Making Tax Digital (MTD) is part of the government’s drive to make tax administration more effective, efficient, and easier for taxpayers.

From April 2026, most sole traders with a total business or property income over £50,000 will need to keep digital records and submit updates to HMRC every quarter instead of once a year.

Why is Making Tax Digital being introduced?

• Accuracy: Digital records reduce errors often caused by manual entry.
• Timeliness: Quarterly updates mean your tax position is clearer throughout the year.
• Simplicity: Over time, MTD will create a more streamlined system for managing your taxes online.
• Future-proofing: Moving to digital now helps businesses adapt as more government services go fully online.

Who Will It Affect?

• Sole traders and landlords with total business and/or property income over £50,000 in the 24/25 tax year from April 2026
• Sole traders and landlords with total business and/or property income over £30,000 in the 25/26 tax year from April 2027
• Sole traders and landlords with total business and/or property income over £20,000 in the 26/27 tax year from April 2028 (this is still under review)

You can check your specific eligibility here:
Check if you’re eligible for Making Tax Digital for Income Tax (HMRC guide)

Timeline: Key Dates You Need to Know

What will I have to do?

1. By default, your quarters will end 5th July, 5th October, 5th January and 5th April. You can elect to change them to 31st March, 30th June, 30th September and 31st December if you wish (if you are VAT registered, and these are your quarters, it may well be easier to do it like this so you only have to prepare one quarter!)
2. At the end of the quarter, you will have 30 days to submit your data to HMRC. You will need to ensure all data is up to date and accurate before submitting it.
3. Each quarter will be cumulative (so will run from 6th April to the quarter end). This means that any errors made in previous quarters will be picked up
4. It is important to note that no tax will need to be paid, just the submission of data.
5. After all 4 quarterly submissions have been made, you will also need to submit a final declaration. This is similar to the current self assessment tax return. This will be where you include any other data in your tax return such as personal capital gains, bank interest, dividends, high income child benefit, pension contributions etc. This will continue to be due by 31st January following the end of the tax year, and your tax owed will also be due by this date.

Checklist: How to Prepare for Making Tax Digital

1. Check your income: Confirm whether your total income exceeds the thresholds for 2026 or 2027.
2. Choose your software: You’ll need MTD-compatible software.
3. Start keeping digital records: The sooner you start, the easier the transition will be. (Backdate to April 2025 to have a full year of data)
4. Join the HMRC pilot: Early participation could make the full switch much smoother.
5. Work with your accountant: We’re here to support you with training, software advice, and tax compliance.

Our Recommendation: Why We Recommend Coconut for Sole Traders

We’ve chosen Coconut as our preferred software for sole traders and landlords. Here’s why:

• Simple, intuitive app for managing income, expenses and tax
• Built specifically for sole traders and property landlords
• Automatically categorises your transactions
• Prepares your quarterly submissions for MTD
• Easy to use on mobile and desktop
• Links seamlessly to your business bank account

You can read more about why we recommend Coconut here:
Read our full blog post about Coconut here

How We Can Help

At Seed Accounting Solutions, we specialise in supporting small (micro!) businesses like yours.

We believe that with the right support, the right software, and clear, simple guidance, you can make a confident transition into MTD – and run a healthier, more profitable business at the same time.

If you’d like a personal walk-through of Coconut or help preparing for MTD, contact us today.

Summary: Key Actions

• Start using digital software now (we recommend Coconut!)
• Learn to track income and expenses digitally
• Understand that from April 2026, quarterly submissions will be required
• Plan for the 2027 threshold if your income is between £30,000 and £50,000
• Talk to us about your specific situation