If you are a sole trader or landlord earning over £50,000 a year from self-employment or property income, HMRC will require you to follow Making Tax Digital (MTD) rules from April 2026. That means no more paper records. No more dropping a shoebox of receipts on your accountant's desk in January. You will need to use compatible software to record your income and expenses digitally, and submit quarterly updates to HMRC.
This is not a distant future change. It is 18 months away at the time of writing. For a sole trader currently using paper records, the transition requires planning. As ICAEW qualified accountants, we have built a month-by-month preparation checklist so you know exactly what to do and when.
Who Is Affected By The April 2026 Go-Live?
MTD for Income Tax Self Assessment (ITSA) applies from April 2026 to sole traders and landlords with qualifying income over £50,000. "Qualifying income" means gross income from self-employment and property, before expenses. If you run a freelance consultancy in Bristol turning over £63,000, you are in scope. If you own a rental property in Birmingham generating £38,000 rent, you are below the threshold for now.
From April 2027, the threshold drops to £30,000. From April 2028, it drops to £20,000. So even if you are below £50,000 today, you will likely be in scope within two years.
What MTD Actually Changes For Sole Traders
Under current self-assessment rules, you keep your records however you like, then submit one annual tax return by 31 January. Under MTD, you must:
- Maintain digital records of all business income and expenses using MTD-compatible software
- Submit a quarterly summary of income and expenses to HMRC within one month of each quarter end
- Submit an end-of-period statement after your final quarter, confirming the figures
- Submit a final declaration (replacing the current self assessment return) by 31 January
The quarterly updates are not tax calculations. They are summary data. HMRC uses them to build a picture of your trading throughout the year. You still calculate your tax once at year-end.
The Month-By-Month Preparation Checklist
This timeline assumes you are a sole trader using paper records today, with a 31 March or 5 April year-end. If your year-end differs, shift the months accordingly.
Month 18 Before Go-Live: October 2024
Audit your current record-keeping. Write down exactly how you track income and expenses today. Paper ledger? Shoebox of receipts? Spreadsheet that you email to your accountant once a year? Be specific.
Identify the gaps. If you have no digital records at all, you need to build a new system from scratch. That takes longer than migrating an existing digital system.
Speak to your accountant about which MTD-compatible software suits your business. The main options for sole traders are Xero, QuickBooks, FreeAgent, and GoSimpleTax. Each has different pricing, features, and learning curves.
Month 12 Before Go-Live: April 2025
Choose your software. Do not leave this until December 2025. You need time to learn the system and migrate your data.
Set up your software with your accountant's guidance. Enter your opening balances as at 6 April 2025. This is your baseline. If you are switching from paper mid-year, your accountant will help you reconstruct your year-to-date figures.
Run a parallel trial for one month. Record April 2025 transactions in your new software while keeping your paper records as normal. Compare the outputs. Fix any discrepancies immediately.
Month 9 Before Go-Live: July 2025
By now you should be recording all transactions in your MTD software. Stop relying on paper. If you still have receipts, scan them using Dext or Hubdoc and link them to the transactions in your software.
Check that your software can submit quarterly updates to HMRC. Most major packages handle this automatically, but you need to authorise the connection through your HMRC online account.
Set up your quarterly reminder system. The quarters under MTD are:
- Quarter 1: 6 April to 5 July
- Quarter 2: 6 July to 5 October
- Quarter 3: 6 October to 5 January
- Quarter 4: 6 January to 5 April
You have one month from the end of each quarter to submit the update. That means Q1 is due by 5 August 2025.
Month 6 Before Go-Live: October 2025
Submit your first voluntary quarterly update for Q1 (April to July 2025). Yes, you can do this before MTD becomes mandatory. HMRC has been running a pilot since 2024.
This is the most important step. It proves your software works, your data is accurate, and your process is repeatable. If something goes wrong, you have six months to fix it before the mandatory start.
Review your Q1 figures with your accountant. Check that the software is categorising transactions correctly. A common mistake is mixing personal and business expenses. Your software should flag this.
Month 3 Before Go-Live: January 2026
By now you should have submitted three voluntary quarterly updates (Q1, Q2, Q3). Your accountant should have reviewed each one.
Check that your end-of-period statement for the 2025/26 tax year is ready. This is the final step before the year-end declaration. Your software will generate this automatically from your quarterly submissions.
File your 2024/25 self assessment return as normal by 31 January 2026. MTD does not replace this return for the 2025/26 year. The 2025/26 return is the last one you will file under the old system.
Month 1 Before Go-Live: March 2026
Final checks. Confirm your software is authorised with HMRC. Confirm your quarterly submission process works. Confirm your accountant can access your software to review and submit.
If you have employees, check whether your payroll software is MTD-compatible. PAYE data does not need to be submitted through MTD, but your software should handle the integration.
Run a test submission for Q4 of 2025/26. This is your last voluntary quarter before the mandatory start.
Go-Live: April 2026
From 6 April 2026, you must submit quarterly updates for all quarters in the 2026/27 tax year. Your first mandatory submission is due by 5 August 2026 for the period April to July 2026.
If you have followed this checklist, you will be submitting your fourth voluntary quarterly update in April 2026. The mandatory process will be routine.
What Happens If You Are Not Ready?
HMRC has stated it will take a "light touch" approach to penalties in the first year. That does not mean no penalties. It means HMRC will contact you, offer support, and only issue penalties if you fail to engage.
The real risk is operational. If you cannot submit quarterly updates, your accountant cannot file your year-end declaration. That means you cannot finalise your tax position. Interest on late payments will still apply.
The cost of non-compliance is higher than the cost of preparation. A basic MTD software subscription costs £10 to £30 per month. The time investment is a few hours per quarter once the system is set up.
Software Options For Sole Traders
Not all accounting software is MTD-compatible. Here are the main options we recommend for sole traders:
- FreeAgent: Built for freelancers and contractors. Includes bank feeds, invoicing, and automatic MTD submissions. £10 per month for sole traders.
- Xero: More features, higher price point. Good if you have multiple income streams or plan to grow. £14 to £32 per month.
- QuickBooks Self-Employed: Simple, mobile-friendly, low cost. £10 per month. Limited reporting compared to Xero or FreeAgent.
- GoSimpleTax: Designed specifically for sole traders and landlords. Straightforward quarterly submission. £12 per month.
Your accountant should be able to access your software to review transactions and submit on your behalf. Check this before committing.
Common Mistakes To Avoid
Do not assume your current spreadsheet counts as digital record-keeping. HMRC requires software that can connect directly to its systems. A spreadsheet you email to your accountant does not qualify.
Do not wait until January 2026 to choose software. The learning curve is real. You will make mistakes in your first month of digital record-keeping. Better to make those mistakes in July 2025 than July 2026.
Do not ignore the quarterly deadlines. Missing a quarterly submission by a day is technically a breach. HMRC may not penalise you immediately, but it will note the pattern.
Do not assume your accountant will handle everything. Your accountant can set up the software and review submissions. But you are responsible for recording your transactions accurately and on time.
How Your Accountant Can Help
As ICAEW qualified accountants, we handle the technical side of MTD migration for our clients. That includes:
- Recommending the right software for your business type and size
- Setting up the software with your opening balances
- Training you on daily transaction recording
- Reviewing and submitting quarterly updates on your behalf
- Filing the end-of-period statement and final declaration
We also handle the transition from paper to digital records. If you have a shoebox of receipts from 2024/25, we can reconstruct your opening position and enter it into the software.
The key point is that we need time to do this properly. A client who contacts us in March 2026 asking for MTD setup will get a very different conversation from a client who started the process in October 2024.
What About Partnerships And Limited Companies?
Partnerships are not in scope for the April 2026 go-live. HMRC has not yet announced a start date for partnerships under MTD. That said, if you run a partnership with individual partners who are sole traders, those partners may be in scope personally.
Limited companies already follow MTD for VAT if their turnover exceeds £90,000. MTD for corporation tax is not yet mandated. HMRC is consulting on the timeline, but no date has been set.
For now, this checklist applies specifically to sole traders and individual landlords with qualifying income over £50,000.
Your Next Step
If you are a sole trader earning over £50,000, the time to act is now. October 2024 is the month to audit your records and start the conversation with your accountant. Every month you delay makes the transition harder.
Contact our team to discuss your MTD preparation timeline. We will review your current record-keeping, recommend software, and build a migration plan that fits your business.
If your turnover is below £50,000 but above £20,000, start planning now. The threshold will drop to £20,000 by April 2028. Early adoption gives you time to get it right.