Making Tax Digital for sole traders: what changes from April 2026?

If you're self-employed or a sole trader in the High Wycombe area, HMRC's Making Tax Digital (MTD) scheme is about to change how you manage your taxes — and the deadline is closer than many people realise.

From April 2026, sole traders and landlords earning over £50,000 will be required to use MTD-compatible software and submit quarterly updates to HMRC instead of a single annual Self Assessment return. The threshold then drops to £30,000 in April 2027, and £20,000 in April 2028.

This guide explains what it means for you, what you need to do, and how to make the transition as straightforward as possible.

What is Making Tax Digital?

Making Tax Digital is HMRC's programme to move the UK tax system fully online. The VAT phase has been in place since 2019. This next phase — known as MTD for Income Tax Self Assessment (MTD ITSA) — brings sole traders and landlords into the system for the first time.

Rather than filing one annual return by January 31st, you'll submit four quarterly updates throughout the year, plus a final end-of-year declaration, all through MTD-compatible software.

Who is affected and when?

• April 2026 — sole traders and landlords with gross income over £50,000

• April 2027 — income over £30,000

• April 2028 — income over £20,000

Partnerships and limited companies are not included in this phase, though HMRC has indicated they may follow in later years.

What software will you need?

You'll need HMRC-recognised MTD software to keep digital records and submit your quarterly updates. Popular options include QuickBooks, FreeAgent, Xero and Sage. Some free options exist for simpler businesses.

The right choice depends on how your business operates — whether you invoice clients, take card payments, or manage rental income. At Altaxa, we help clients choose and set up the right software as part of our MTD service, so you're not left figuring it out alone.

What do the quarterly updates involve?

Each quarter you submit a summary of your income and expenses through your software. These aren't tax payments — they're simply updates that give HMRC a live picture of your finances. You'll still make your final declaration and pay any tax owed by 31 January each year.

Common questions about MTD for sole traders

Do I need an accountant for MTD? You're not legally required to use one, but most sole traders find quarterly reporting significantly easier with professional support — particularly in year one when the new routine is bedding in. At Altaxa, our MTD package handles your quarterly submissions on your behalf so you can focus on running your business.

What if I miss a quarterly deadline? HMRC's new penalty points system means you'll accumulate points for missed submissions. Once you reach a threshold, a financial penalty applies. Getting set up early is the best way to avoid this.

Can I still use spreadsheets? Only if you connect them to HMRC's systems using bridging software. A standalone spreadsheet submitted manually will not be compliant under MTD.

Steps to take now

1. Check whether your income brings you into scope for April 2026 or 2027

2. Choose MTD-compatible software — or ask us for a recommendation

3. Start keeping digital records now, before the mandate kicks in

4. Make sure your accountant's package covers quarterly MTD submissions

How Altaxa can help

At Altaxa Accountants in High Wycombe, we've been helping sole traders, landlords and small businesses across Buckinghamshire navigate Making Tax Digital from the start. Our team handles the software setup, quarterly submissions and ongoing compliance — so you don't have to think about it.

Packages start from just £47/month and include MTD support as standard. Book a free appointment to find out how we can help you get ready before the April 2026 deadline.