Making Tax Digital for sole traders: what actually changes

One tax return a year is being replaced by digital records and quarterly updates. Here's what that means in practice, who it applies to and when — without the scare stories.

MyWorkBase Guides · Checked against HMRC guidance · General guidance, not tax advice

The change in one paragraph

Making Tax Digital for Income Tax replaces the once-a-year Self Assessment scramble with a steadier rhythm: you keep your business records digitally as you go, send HMRC a short summary of income and expenses every quarter, and then wrap the year up with a final declaration. Nothing about what tax you owe changes — what changes is how, and how often, the figures reach HMRC.

Who it applies to, and when

It's being phased in by income level, based on your total gross self-employment and property income (turnover, not profit):

From April 2026 — those with qualifying income over £50,000 (this phase is now live)
From April 2027 — over £30,000
From April 2028 — over £20,000 (announced)

Below the threshold, Self Assessment carries on as before for now — but the direction of travel is clear, and the habits that make MTD painless are worth having early. Note it's HMRC's view of your income (from your last return) that pulls you in, and some groups can claim exemption — check your own position.

The quarterly rhythm

Quarters follow the tax year, and each update is due by the 7th of the month after the quarter ends:

Standard quarters and deadlines

6 April – 5 July → update due 7 August
6 July – 5 October → due 7 November
6 October – 5 January → due 7 February
6 January – 5 April → due 7 May
Then the final declaration — confirming the year's figures, with any accounting adjustments — by 31 January, as now

A quarterly update is a summary of income and expense totals, not a mini tax return: no accounting adjustments, no finalising, no payment due with it (payment dates stay as they are). If a quarter's update turns out imperfect, the running totals correct themselves in later submissions — the final declaration is where accuracy truly matters.

What "digital records" actually means

Each income and expense entry needs to be recorded in software (or a spreadsheet linked to software) rather than a paper day-book, and the quarterly figures must flow to HMRC through MTD-compatible software — you can't type them into a web form. In practice, if your invoices and expenses already live in an app as you go, the quarterly update stops being an event at all: the records exist the moment the work happens.

Miss a deadline and…

Lateness runs on a points system: each late quarterly submission earns a point, and at four points a £200 penalty lands (with points expiring after a period of good behaviour). It's designed to forgive the odd slip and punish the pattern — which is precisely why a reminder system beats good intentions.

Getting ready without drama

Know your number — if your gross self-employed (plus property) income is near a threshold, assume you're in scope soon.
Go digital with records now, before you're forced to — the transition is trivial when the habit already exists.
Keep labour, materials and expenses clean as you go — the quarterly totals then build themselves.
Talk to your accountant early — they can file the updates for you, but only if the records reach them in usable shape.

MyWorkBase keeps the quarters ready as you work.

Your invoices and expenses build each quarter's income, expenses and profit automatically, every HMRC deadline sits on one screen with reminders before it, and one button sends the quarter's figures, statements and receipts to your accountant. MyWorkBase prepares the figures — you and your accountant stay in control of what's filed. The MTD add-on is £9.99/month; invoicing stays free forever.

Start free

This guide is general guidance, not tax advice. Thresholds, dates and penalty rules can change — check current HMRC guidance or speak to your accountant about your own position.