Making Tax Digital
Making Tax Digital for sole traders: what changes, and when
Making Tax Digital for Income Tax started applying on 6 April 2026, and most of what is written about it is aimed at accountants. This is the version for a sole trader who does the work and the books: who it catches, what the four updates actually involve, whether your spreadsheet survives, and what to do if none of it should apply to you.
For UK sole traders · Checked against HMRC guidance on 31 August 2026 · About 8 minutes
It is decided on turnover, not profit
Making Tax Digital for Income Tax arrives in three waves, and which one catches you is decided by your QUALIFYING INCOME. The definition of that is the single most misunderstood thing about the whole regime, and getting it wrong in either direction costs you: either you prepare for a deadline that was never yours, or you miss one that was.
| Applies if | Tested on | |
|---|---|---|
| 6 April 2026 | Qualifying income over £50,000 | The 2024 to 2025 Self Assessment return |
| 6 April 2027 | Qualifying income over £30,000 | The 2025 to 2026 Self Assessment return |
| 6 April 2028 | Qualifying income over £20,000 | The 2026 to 2027 Self Assessment return |
The right-hand column is the part worth pausing on. The return being tested is two tax years before the start date, which means the figure that decides whether you are in from April 2026 is one you filed in January 2026. It is already sitting in your HMRC account. You are not waiting to find out.
What counts towards the threshold
Two sources of income count and they are added together: self-employment and property. If you turn over £35,000 on the tools and receive £20,000 in rent, your qualifying income is £55,000 and you are in the first wave, even though neither figure crosses £50,000 on its own.
- Self-employment turnover, before any expenses come off
- Property income, before any expenses come off
- Both added together where you have both
What does not count towards the test:
- Wages from employment, including a job you do alongside the trade
- Dividends
- Your share of a partnership's profit
- Pension income
Four updates and a return that replaces Self Assessment
The shape of the year changes rather than the amount of tax. You keep digital records as you go, send four updates during the year, and finish with a return that replaces the Self Assessment one you file now. The updates are cumulative totals of income and expenses, not a tax calculation, and nothing is due to be paid on the back of them.
The four dates do not move: 7 August, 7 November, 7 February and 7 May. Traders who pick calendar update periods sometimes expect different deadlines and there are none. The period you report on changes; the day it is due does not.
You can keep your spreadsheet
The most repeated claim about Making Tax Digital is that spreadsheets are finished, and it is not true. HMRC's own software page describes BRIDGING SOFTWARE, which connects to records you already keep in a spreadsheet or another tool and sends the updates from there.
Whether you should keep the spreadsheet is a different question from whether you may. Four updates a year means the reconstruction happens four times instead of once, and a spreadsheet that survives one annual push tends not to survive that. The honest answer is that the spreadsheet is legal and the quarterly rhythm is what usually kills it.
Who can apply for an exemption
Exemption is not a category you fall into. It is something you apply for, and HMRC describes two kinds.
| What it is | How long | |
|---|---|---|
| Temporary exemption | Applied for, with your reasons | Until at least April 2027 |
| Digitally excluded | Applied for, on the grounds that using digital tools is not reasonably possible for you | Can be longer lasting, depending on your circumstances |
HMRC asks you to explain why you think an exemption should apply, with digital exclusion as the example it gives. Beyond that it has not published a tidy list of qualifying circumstances, so any page offering you one is filling a gap HMRC left rather than reporting a rule. If you think this is you, read HMRC's exemption guidance itself and apply on the facts of your own situation.
What happens if you miss a quarterly update
For the 2026 to 2027 tax year HMRC has said there are no penalties for missing a quarterly update deadline. The update still has to be sent before the return, so a missed one is a job deferred rather than a job cancelled.
After that a points-based system applies:
- One point for each missed quarterly deadline
- A £200 penalty once you reach four points
- A further £200 for each subsequent miss while you are at the threshold
- Points below the threshold expire 24 months after the deadline they relate to
The first year being penalty-free is the reason to treat 2026 to 2027 as the year to get the habit wrong in cheaply, rather than the year to ignore.
Partnerships and companies are not in yet
Making Tax Digital for Income Tax is aimed at individuals with self-employment or property income. HMRC's eligibility guidance says partnerships will need to use the service in future and does not give a date for it. If you trade through a limited company, your Corporation Tax obligations are not changed by any of the dates above.
Any specific year you see quoted for partnerships or for Corporation Tax is not something HMRC has published, which is worth knowing before you plan around it.
Where My Job Goblin fits
The part of Making Tax Digital that is actually work is the record keeping, and it is work that has to happen all year rather than in the week before a deadline. Quotes, invoices and photographed receipts kept as you go mean the quarterly figures already exist when the update is due.
Keep the records as you do the jobs
Quote from the van, invoice the day the job is done, photograph the receipt when you buy the materials. The digital records Making Tax Digital asks for end up being a by-product of running the work, which is the only way they ever get kept properly.
Sources
- Check if you are eligible for Making Tax Digital for Income Tax, HMRCThe three thresholds, the dates they apply from, and the return each one is tested against.
- Work out your qualifying income, HMRCQualifying income is total income from self-employment and property BEFORE expenses, also known as turnover.
- Send quarterly updates, HMRCThe standard and calendar update periods, and the deadline one month and two days after each period ends.
- Apply for an exemption from Making Tax Digital for Income Tax, HMRCThe two kinds of exemption, temporary and digitally excluded, and how to ask for one. Read on 31 August 2026.
- Penalties for Making Tax Digital for Income Tax, HMRCThe points-based late submission system, and the position for the 2026 to 2027 tax year.
- Find software that works with Making Tax Digital for Income Tax, HMRCHMRC's own list of recognised software, including bridging software for spreadsheets. Check it before relying on any product, including this one, for MTD filing.
This is general information about how Making Tax Digital for Income Tax works, checked against HMRC's published guidance on 31 August 2026. It is not tax advice and it cannot take account of your own circumstances. Whether the regime applies to you, and from when, turns on figures only you and HMRC hold. If your position is unusual, or you think an exemption applies, speak to an accountant or contact HMRC directly.