Making Tax Digital (MTD) for sole traders means submitting quarterly tax updates using HMRC-recognised software instead of one annual Self Assessment return. From April 2026, it’s mandatory for sole traders with qualifying income over £50,000.
This is the short, sole-trader version. For the full background — how MTD works, who it affects, and every software requirement — read our complete guide: What is Making Tax Digital? The complete guide for UK sole traders.
Who has to do it?
MTD for Income Tax applies to sole traders and landlords who report their income through Self Assessment. It is being phased in by qualifying income:
- Over £50,000 — mandatory from April 2026
- Between £30,000 and £50,000 — mandatory from April 2027
- Below £30,000 — not yet confirmed
Qualifying income is your gross income (before expenses) from:
- Self-employment and trading income, and
- UK property income reported on your Self Assessment return.
It doesn’t include employment income, dividends, savings interest, or capital gains. And if your income means you don’t file Self Assessment at all, you’re not caught. HMRC may also grant an exemption if you cannot use digital tools because of age, disability, where you live, or religious grounds — but you have to apply.
What you need to do — in 4 steps
- Choose HMRC-recognised software. Your package must be on HMRC’s MTD for Income Tax list and able to talk to HMRC’s systems directly.
- Keep digital records. Record your income and expenses digitally as you go — a spreadsheet on its own no longer counts.
- Submit quarterly updates. Four times a year, send HMRC a summary of your income and expenses for each three-month period. Your software does the submission.
- Submit the End of Period Statement. After the tax year ends, send your final figures by 31 January, alongside your final declaration.
Key dates for 2026/27
| Date | Deadline |
|---|---|
| 7 August 2026 | Q1 quarterly update (6 April – 5 July) |
| 7 November 2026 | Q2 quarterly update (6 July – 5 October) |
| 7 February 2027 | Q3 quarterly update (6 October – 5 January) |
| 7 May 2027 | Q4 quarterly update (6 January – 5 April) |
| 31 January 2028 | End of Period Statement (EOPS) + final declaration |
Need the longer version? See our dedicated MTD quarterly deadlines 2026 guide.
What are the penalties?
Missing a quarterly update by itself carries no fixed penalty — but it’s still your legal obligation, and HMRC can investigate persistent misses. The penalties bite on the year-end statement:
| Offence | Penalty |
|---|---|
| Missing the End of Period Statement (EOPS) | £100 |
| 3 months late | £300 |
| 6 months late | £500 |
| 12 months late | Additional penalties possible |
HMRC can waive penalties in genuine hardship, but the safest plan is simple: use HMRC-recognised software, reconcile regularly, and never miss a deadline.
Frequently asked questions
When does MTD become mandatory for sole traders?
From April 2026 it’s mandatory for sole traders with qualifying income above £50,000, and from April 2027 for qualifying income above £30,000.
What counts as qualifying income?
Qualifying income is your gross income from self-employment and UK property reported on a Self Assessment return, before expenses. Employment income, dividends, savings interest, and capital gains are not counted.
Do I still file a Self Assessment return under MTD?
Yes. The quarterly updates replace the once-a-year income calculation, but you still submit an End of Period Statement (EOPS) and final declaration by 31 January after the tax year ends.
Can I use a spreadsheet for MTD?
Not on its own. You need HMRC-recognised software that submits quarterly updates directly to HMRC via its API. Spreadsheet-only record-keeping doesn’t meet MTD requirements.
The bottom line for sole traders
If your qualifying income is over £50,000, MTD becomes mandatory from April 2026, and the threshold drops to £30,000 from April 2027. The practical takeaway: choose HMRC-recognised software now, keep digital records, and submit four quarterly updates plus an End of Period Statement each year. Our picks to start with are Xero (from £7/month), Sage Accounting (from £14/month), and Zoho Books (free under £50k turnover).
Want the full picture? Read the complete MTD guide for UK sole traders.