Quick answer
Last checked: 1 October 2026. General information, not tax advice. MTD HQ is independent and not affiliated with HMRC.
If you’re self-employed as a sole trader, Making Tax Digital for Income Tax applies when your takings before expenses, plus any rental income, go over a threshold. That’s £50,000 now, £30,000 from 6 April 2027 and £20,000 from 6 April 2028. Once you’re in, you keep digital records, send HMRC a short update every three months, and send your yearly tax return through your software.
The part that catches sole traders out: HMRC looks at your turnover, not your profit. A hairdresser who takes £34,000 a year but spends £16,000 on rent, products and wages is still over £30,000.
Check in 30 seconds: use our free Do I need MTD? checker.
Does MTD apply to you?
HMRC adds up your qualifying income: your gross (before-expenses) income from self-employment and property, taken from an earlier tax return (GOV.UK).
| HMRC checks your… | If qualifying income is over | You need MTD from |
|---|---|---|
| 2024/25 tax return | £50,000 | 6 April 2026 |
| 2025/26 tax return | £30,000 | 6 April 2027 |
| 2026/27 tax return | £20,000 | 6 April 2028 |
What counts: your sole trader sales or takings before expenses, plus any rent you receive (your share, if you own property jointly).
What doesn’t count: wages from a job, pensions, savings interest, dividends, and your share of profit from a partnership. If you’re a partner rather than a sole trader, partnership income isn’t included (GOV.UK).
Non-standard accounting year? If your accounts don’t run for a normal 12 months, HMRC will scale your income up or down to a 12-month figure where it has the information.
Worked examples
These people are made up, to show how the rules work.
Jade: hairdresser. Jade’s takings were £34,000 on her 2025/26 return. After costs her profit was £18,000. HMRC uses the £34,000, which is over £30,000, so Jade needs MTD from 6 April 2027.
Sam: part-time cleaner with a job. Sam earns £26,000 from a job and £12,000 from cleaning on the side. His wages don’t count, so his qualifying income is £12,000. He doesn’t need MTD on these figures.
Asha: graphic designer who lets a flat. Asha’s design takings are £22,000 and her rent is £10,000. Together that’s £32,000, over £30,000. She needs MTD from April 2027, even though neither income is over the threshold on its own.
Ray: plumber in a partnership. Ray’s share of a plumbing partnership’s profit doesn’t count towards qualifying income, so on its own it doesn’t bring him into MTD.
Lee: electrician turning over £24,000. Lee is under £30,000, so he’s not in from 2027. But he’s over £20,000, so if his 2026/27 takings are similar, he’ll need MTD from April 2028.
What you’ll need to do
Once you’re in, there are four jobs. None of them change how much tax you pay; they change how and when you report it.
- Use MTD-compatible software. HMRC doesn’t provide its own; you choose from software it recognises, and some options are free. Spreadsheets can still work if you use “bridging” software to send the figures.
- Keep digital records of your sales and expenses as you go, rather than in a notebook or a shoebox of receipts.
- Send a quarterly update four times a year: a summary of income and expenses. It isn’t a tax return, and no tax is paid at this point.
- Send your tax return once a year, through your software, by 31 January after the tax year ends (GOV.UK).
Deadlines
| Quarter | Covers | Update due by |
|---|---|---|
| 1 | 6 April to 5 July | 7 August |
| 2 | 6 July to 5 October | 7 November |
| 3 | 6 October to 5 January | 7 February |
| 4 | 6 January to 5 April | 7 May |
| Tax return | The whole tax year | 31 January after the tax year ends |
Tax is still paid on the usual Self Assessment dates.
Penalties
Each missed deadline earns a penalty point. Reach 4 points within two years and you get a £200 penalty, plus £200 for each later miss. Points clear after 12 months of on-time submissions, once anything outstanding from the past 24 months is sent (ICAS).
HMRC won’t give penalty points for late quarterly updates in the 2026/27 tax year. Points still apply to a late tax return (GOV.UK).
Choosing software as a sole trader
Look for software that’s simple to use day to day, connects to your business bank account so transactions come in automatically, and lets you snap photos of receipts. If you also have rental income, make sure it handles property too. We’ll publish an honest comparison soon, including free options.
Can you get an exemption?
You can apply for an exemption if it isn’t reasonable for you to go digital, for example because of your age, a disability, where you live (such as poor internet) or your religion. You apply to HMRC; it isn’t automatic. See GOV.UK: exemptions from MTD.
FAQs
Does MTD mean I pay more tax? No. It changes how often you report, not how much you owe.
Is it based on my turnover or my profit? Turnover: your sales or takings before expenses.
I have a job and a small side business. Does my salary count? No. Only self-employment and property income count.
I’m in a partnership. Do I need MTD? Partnership income doesn’t count towards your qualifying income, so it won’t bring you in on its own.
Can my accountant do it for me? Yes. An accountant or agent can keep your records and send updates on your behalf.
What if my takings drop below the threshold? You carry on with MTD until your qualifying income has been below the threshold for three tax years in a row (LITRG).
What if I stopped trading before 6 April 2026? If all your self-employment and property income stopped before that date, you don’t need to use MTD (GOV.UK).
Have rental income too? Read our landlord guide for the property side.
What should I do now? Run the MTD checker. If you’re in from 2027, pick software this winter and start using it before April, so the first quarterly update isn’t a scramble.
MTD HQ is independent and not affiliated with HMRC. This guide is general information, not tax advice. For your own situation, speak to an accountant or tax adviser.