{"id":10470,"date":"2025-11-12T17:06:32","date_gmt":"2025-11-12T17:06:32","guid":{"rendered":"https:\/\/www.sage.com\/en-gb\/blog\/?p=10470"},"modified":"2026-01-06T16:39:48","modified_gmt":"2026-01-06T16:39:48","slug":"self-assessment-ending-making-tax-digital-sole-traders","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-gb\/blog\/self-assessment-ending-making-tax-digital-sole-traders\/","title":{"rendered":"Self Assessment and Making Tax Digital: What MTD for Income Tax means for sole traders"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tSelf Assessment and Making Tax Digital: What MTD for Income Tax means for sole traders\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-11-12T17:06:32+00:00\">12 November, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Self Assessment and Making Tax Digital: What MTD for Income Tax means for sole traders\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-gb\/blog\/self-assessment-ending-making-tax-digital-sole-traders\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-gb\/blog\/author\/keirthomasbryant\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/06\/keir-short-hair-350x350.jpg\" class=\"entry-author__image\" alt=\"\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/06\/keir-short-hair-350x350.jpg 350w, https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/06\/keir-short-hair.jpg 760w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Keir Thomas-Bryant<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<p>Get the lowdown on how Making Tax Digital will change the way sole traders submit tax returns, and what that means for Self Assessment.<\/p>\n\n\n\n<p>You may have heard of Making Tax Digital. You might have also heard that it means the end of&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/self-assessment-tax-return-file-tips\/\">Self Assessment<\/a>.<\/p>\n\n\n\n<p>As usual, the truth is a little more nuanced.<\/p>\n\n\n\n<p>From April 2026, sole traders earning over \u00a350,000 will have to switch to using&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/making-tax-digital\/\">Making Tax Digital<\/a>&nbsp;(MTD) for their income tax. They\u2019ll stop using traditional tax returns for their self-employment income.<\/p>\n\n\n\n<p>The same goes for those earning over \u00a330,000 from April 2027, and over \u00a320,000 from April 2028.<\/p>\n\n\n\n<p>Those earning under the thresholds will continue to use <a href=\"https:\/\/www.sage.com\/en-gb\/sage-business-cloud\/accounting\/features\/self-assessment\/\">Self Assessment<\/a>.<\/p>\n\n\n\n<p>For now, this article will look at the details and at what\u2019s changing with MTD.<\/p>\n\n\n\n<p>Here\u2019s what we cover:<\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-how-self-assessment-works-now\" data-level=\"2\">How Self Assessment works now<\/a><\/li><li><a href=\"#h-how-things-will-change-with-nbsp-making-tax-digital-nbsp-for-income-tax\" data-level=\"2\">How things will change with&nbsp;Making Tax Digital&nbsp;for Income Tax<\/a><\/li><li><a href=\"#h-why-mtd-can-make-life-easier-for-sole-traders\" data-level=\"2\">Why MTD can make life easier for sole traders<\/a><\/li><li><a href=\"#h-self-assessment-vs-making-tax-digital-for-income-tax-what-s-required\" data-level=\"2\">Self Assessment vs Making Tax Digital for Income Tax&mdash;what&rsquo;s required?<\/a><ul><li><a href=\"#h-what-is-mtd-ready-software\" data-level=\"3\">What is MTD-ready software?<\/a><\/li><li><a href=\"#h-can-you-use-spreadsheets-for-mtd-for-income-tax\" data-level=\"3\">Can you use spreadsheets for MTD for Income Tax?<\/a><\/li><li><a href=\"#h-why-using-mtd-ready-software-is-the-better-approach\" data-level=\"3\">Why using MTD-ready software is the better approach<\/a><\/li><\/ul><\/li><li><a href=\"#h-what-sole-traders-can-do-now-to-prepare-for-mtd-for-income-tax\" data-level=\"2\">What sole traders can do now to prepare for MTD for Income Tax<\/a><ul><li><a href=\"#h-1-start-using-accounting-software-and-keeping-digital-records\" data-level=\"3\">1. Start using accounting software and keeping digital records<\/a><\/li><li><a href=\"#h-2-photograph-your-receipts\" data-level=\"3\">2. Photograph your receipts<\/a><\/li><li><a href=\"#h-3-get-support-with-the-changes\" data-level=\"3\">3. Get support with the changes<\/a><\/li><\/ul><\/li><li><a href=\"#h-final-thoughts\" data-level=\"2\">Final thoughts<\/a><\/li><li><a href=\"#h-frequently-asked-questions-on-making-tax-digital-for-income-tax\" data-level=\"2\">Frequently asked questions on Making Tax Digital for Income Tax<\/a><ul><li><a href=\"#h-what-if-it-costs-me-too-much-money-to-switch-to-digital-accounting-do-i-still-have-to-declare-tax-for-making-tax-digital\" data-level=\"3\">What if it costs me too much money to switch to digital accounting? Do I still have to declare tax for Making Tax Digital?<\/a><\/li><li><a href=\"#h-can-i-manage-my-making-tax-digital-requirements-myself-rather-than-hire-an-accountant\" data-level=\"3\">Can I manage my Making Tax Digital requirements myself rather than hire an accountant?<\/a><\/li><\/ul><\/li><\/ul><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-self-assessment-works-now\">How Self Assessment works now<\/h2>\n\n\n\n<p>The Self Assessment system is built around a yearly tax return, where you inform HMRC of your income,&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/allowable-expenses-self-assessment-tax-return\/\">business-related allowable expenses,<\/a>&nbsp;and any adjustments or allowances required.<\/p>\n\n\n\n<p>Using these figures, HMRC calculates your final income tax and National Insurance bill.<\/p>\n\n\n\n<p>Some people fill in their own&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/file-a-tax-return-online\/\">Self Assessment form<\/a>, while others have their accountant do it on their behalf.<\/p>\n\n\n\n<p>Most people submit their Self Assessment online, through HMRC\u2019s digital service, with a deadline of midnight on 31 January following the end of the tax year.<\/p>\n\n\n\n<p>But it\u2019s also possible to fill in the paper SA100 and post it to HMRC, in which case it must arrive no later than 31 October following the end of the tax year.<\/p>\n\n\n\n<p>Any outstanding tax and National Insurance amounts must be paid by 31 January.<\/p>\n\n\n\n<p>If you pay&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/what-is-payment-on-account\/\">tax on account<\/a>, at this point you\u2019ll also make your first payment on account for the most recent tax year (with the second due by 31 July).<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">E-Book: Your Guide to MTD for Income Tax<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>Our free guide is written by experts and is all you need as a sole trader or landlord to understand what MTD means for your business\u2014and how to ensure you&#8217;re ready in time.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<p><!-- wp:paragraph --><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-626d6b26-aa95-4f75-a5a0-9cce8bff833f\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Get Your Guide to MTD for Income Tax<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"800\" height=\"450\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/10\/cta-mtd-guide.jpg\" class=\"single-cta__image\" alt=\"A woman reading a guide about MTD for Income Tax\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/10\/cta-mtd-guide.jpg 800w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-things-will-change-with-nbsp-making-tax-digital-nbsp-for-income-tax\">How things will change with&nbsp;Making Tax Digital&nbsp;for Income Tax<\/h2>\n\n\n\n<p>If you earn over \u00a350,000 in total from a combination of income as a&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/mtd-for-income-tax-sole-traders\/\">sole trader<\/a>&nbsp;and\/or from&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/mtd-income-tax-landlords-need-to-know\/\">rental income as a landlord<\/a>, you\u2019ll need to start following the rules of&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/mtd-for-income-tax-sole-traders\/\">Making Tax Digital for Income Tax<\/a>&nbsp;(also known as MTD for Income Tax) from April 2026.<\/p>\n\n\n\n<p>If you earn less than \u00a350,000 but more than \u00a330,000, you\u2019ll need to start following the rules from April 2027. And you&#8217;ll need to comply from April 2028 if you earn more than \u00a320,000.<\/p>\n\n\n\n<p>What does this mean? You\u2019ll no longer need to fill in a Self Assessment return.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-gb\/blog\/mtd-income-tax-needs-to-know\/\">MTD for Income Tax<\/a>&nbsp;means you\u2019ll need to use MTD-ready software to digitally keep your accounting records relating to income tax. This makes it easier for sole traders and landlords to manage their taxes.<\/p>\n\n\n\n<p>There are three further key requirements that you or your accountant must do:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Provide quarterly updates to HMRC<\/strong>, at least every three months. This must be via MTD-ready software. You\u2019ll need to provide separate updates for each business you run (if more than one), as well as a separate one for all rental income you receive as a landlord.<\/li>\n\n\n\n<li><strong>Provide a digital tax return of all your income<\/strong>&nbsp;for each business and for rental income. This must be submitted no later than 31 January following the end of the tax year. It summarises the income, allowances, and adjustments for each business and rental income. It will also need to include any claims for personal allowances such as High Income Child Benefit Charge or Marriage Allowance.<\/li>\n\n\n\n<li><strong>Pay any tax and national insurance you owe<\/strong>, no later than 31 January following the end of the tax year. Note that the payment on account system will continue, so you may need to make a further payment on 31 July of the same year.<\/li>\n<\/ul>\n\n\n\n<p>And that\u2019s all that\u2019s new.<\/p>\n\n\n\n<p>MTD for Income Tax doesn\u2019t change the rules of income tax. The rules around&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/allowable-expenses-self-assessment-tax-return\/\">allowable expenses<\/a>, personal tax allowances, National Insurance contributions, and so on, all remain the same.<\/p>\n\n\n\n<p>Similarly, you\u2019ll continue to pay tax and National Insurance in the same way, and the bill shouldn\u2019t be any different had you done it via Self Assessment (assuming your accounting is correct).<\/p>\n\n\n\n<p>All that changes with MTD for Income Tax are the requirements and processes around reporting the information to HMRC.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-why-mtd-can-make-life-easier-for-sole-traders\">Why MTD can make life easier for sole traders<\/h2>\n\n\n\n<p>Despite the initial challenge of these changes to processes,&nbsp;MTD for Income Tax isn\u2019t that difficult.<\/p>\n\n\n\n<p>The goal is to give you better insight into your taxes and by extension, you get better visibility into your business finances.<\/p>\n\n\n\n<p>This includes your all-important cash flow.<\/p>\n\n\n\n<p>Many of the additional processes required for MTD for Income Tax will be automated, provided you use <a href=\"https:\/\/www.sage.com\/en-gb\/sage-business-cloud\/accounting\/features\/self-assessment\/\">HMRC-recognised accounting software<\/a>.<\/p>\n\n\n\n<p>And for your periodic updates, it\u2019ll simply be a matter of clicking or tapping a button to prepare the report, then checking it briefly, before sending it off.<\/p>\n\n\n\n<p>You should know there\u2019s no legal requirement for the periodic updates to even be accurate\u2014although it\u2019s best if they are.<\/p>\n\n\n\n<p>For the digital tax return, you\u2019ll need to ensure that any adjustments have been included both for each business and also as an individual before submitting.<\/p>\n\n\n\n<p>It\u2019ll be straightforward to get all the information together, provided you\u2019ve made good use of your accounting software.<\/p>\n\n\n\n<p>If you use an accountant, they can help with the periodic updates and digital tax return, just as they provide support with&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/file-a-tax-return-online\/\">Self Assessment tax returns<\/a>.<\/p>\n\n\n\n<p>The level of financial insight provided by Making Tax Digital can make planning for growth so much easier.<\/p>\n\n\n\n<p>For example, if you want to save for some capital expenditure, such as getting a new van, this should become a lot more straightforward.<\/p>\n\n\n\n<p>Similarly, it becomes a cinch to spot trends, so you can capitalise on things such as seasonal business movements.<\/p>\n\n\n\n<p>Furthermore, because of the insight you gain into your cash flow, you can also spot problems before they arise.<\/p>\n\n\n\n<p>Of course, MTD for Income Tax means having a good idea throughout the year of your likely tax bill too.<\/p>\n\n\n\n<p>Rather than setting aside a nebulous 25% to 30% of your income for the bill, you can set aside a more accurate amount.<\/p>\n\n\n\n<p>Although until the digital tax return is complete and any adjustments and allowances are accounted for, it will continue to be tricky to predict the precise amount you owe.<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">E-Book: Switching from Self Assessment to Making Tax Digital<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>Worried about following MTD&#8217;s rules in April 2026? This brief yet comprehensive guide explains what you need to know: How you do accounting now, and how you should do it in future.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-3b52a309-fae9-49fa-a235-03fc76c551a0\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Get MTD for Income Tax: A Guide to Switching From Self Assessment<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1215\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2023\/09\/GettyImages-1385092066-1215x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2023\/09\/GettyImages-1385092066-1215x810.jpg 1215w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-self-assessment-vs-making-tax-digital-for-income-tax-what-s-required\">Self Assessment vs Making Tax Digital for Income Tax\u2014what\u2019s required?<\/h2>\n\n\n\n<p>For Self Assessment, the sole reporting requirement is to complete and submit a Self Assessment tax return (and pay your tax and National Insurance bill, of course).&nbsp;<\/p>\n\n\n\n<p>You also need to keep the underlying records for a period of time, the exact period varies depending on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>When you submit your Self Assessment tax returns<\/li>\n\n\n\n<li>If you\u2019re also VAT registered<\/li>\n\n\n\n<li>If you\u2019re registered for the Mini One Stop Shop (MOSS)<\/li>\n\n\n\n<li>If there are any ongoing discussions with HMRC.<\/li>\n<\/ul>\n\n\n\n<p>However, how you do your accounting is up to you. You can currently record it using a paper notebook, or a&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/speed-up-business-processes\/\">spreadsheet<\/a>, or you could use dedicated accounting software.<\/p>\n\n\n\n<p>This all changes radically under MTD for Income Tax.<\/p>\n\n\n\n<p>The biggest change is that you must use MTD-ready software and send quarterly updates and a digital tax return to HMRC through the software.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-is-mtd-ready-software\">What is MTD-ready software?<\/h3>\n\n\n\n<p>MTD-ready software has been through HMRC\u2019s recognition process and is therefore compatible with MTD&#8217;s requirements. <\/p>\n\n\n\n<p>For a sole trader or landlord, it should include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>All the pieces of software you use to create the original digital records of your business activity (such as sales, purchases and any accounting adjustments)<\/li>\n\n\n\n<li>The software that then generates the HMRC updates (normally by summarising the data from your original digital records)<\/li>\n\n\n\n<li>The software that then electronically submits the updates to HMRC. <\/li>\n<\/ul>\n\n\n\n<p>The journey from the digital records (once created) to the digital submission must all be digital, meaning no copying and pasting is permitted.&nbsp;<\/p>\n\n\n\n<p>This is a point of law, and there\u2019s no getting around it unless there\u2019s a very good reason (you live in a remote location without an internet connection, for example, or your religious beliefs mean you can\u2019t use a computer\u2014these are known as examples of digital exclusion, and you should speak to HMRC if you think they apply to your situation).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-can-you-use-spreadsheets-for-mtd-for-income-tax\">Can you use spreadsheets for MTD for Income Tax?<\/h3>\n\n\n\n<p>You do have some flexibility in how you use software to keep your accounting records.<\/p>\n\n\n\n<p>It\u2019s possible to use a spreadsheet, for example, along with&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/glossary\/what-is-a-bridging-tool-or-bridging-software\/\">bridging software<\/a>&nbsp;that will use formulas to gather together the details from the various cells on the spreadsheet and then prepare your periodic updates and digital tax return, as each is required.<\/p>\n\n\n\n<p>This would help you be legally compliant but, as you might\u2019ve realised, it would barely be more than a makeshift solution. Under the mandate, you also must keep your spreadsheet data intact, including ensuring that you have separate records (cells in the spreadsheet) for any adjustments.<\/p>\n\n\n\n<p>Furthermore, using a spreadsheet runs the risk of breaking the rules around digital linking, as Making Tax Digital requires the movement of data to be both digital and automated. Manually copying and pasting from one place to another is prohibited most of the time.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-why-using-mtd-ready-software-is-the-better-approach\">Why using MTD-ready software is the better approach<\/h3>\n\n\n\n<p>Due to issues with spreadsheets, most people will find it much easier to use MTD-ready&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/sage-business-cloud\/accounting\/features\/self-assessment\/\">accounting software<\/a>. Since using it encourages basic accounting practices, such as&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/accounting-software\/invoicing\/\">using the software to submit invoices<\/a>&nbsp;and record payments, creating and submitting your periodic updates, payment tracking, automatic tax calculations and the digital tax return will be simple.<\/p>\n\n\n\n<p>The data will already be in the system, and up to date.<\/p>\n\n\n\n<p>There is <a href=\"https:\/\/www.sage.com\/en-gb\/size\/self-employed\/#pricing\">free software already available for MTD for Income Tax<\/a>.<\/p>\n\n\n\n<p>If you already have a cloud accounting software subscription, it\u2019s very likely it will be ready for MTD for Income Tax.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-sole-traders-can-do-now-to-prepare-for-mtd-for-income-tax\">What sole traders can do now to prepare for MTD for Income Tax<\/h2>\n\n\n\n<p>While the introduction of MTD for Income Tax sounds like it\u2019s a long way away, the reality is that it\u2019ll be here in no time. It\u2019s worth getting prepared now.<\/p>\n\n\n\n<p>Here\u2019s three ways you can do that:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-start-using-accounting-software-and-keeping-digital-records\">1. Start using accounting software and keeping digital records<\/h3>\n\n\n\n<p>This is the basic legal requirement of Making Tax Digital. If you\u2019re not doing so already, you should look to switch to using some kind of&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/sage-business-cloud\/accounting\/features\/self-assessment\/\">software for your accounting<\/a>.<\/p>\n\n\n\n<p>If you are a sole trader, and your income is blended into a personal banking account or you have multiple income streams, you may also want to consider getting a business account for each. This makes it easier for the software to collate the relevant data from each business for your MTD for Income Tax quarterly reports and the digital tax return.<\/p>\n\n\n\n<p>Alternatively, as mentioned earlier, this could be using a spreadsheet to create a makeshift ledger to log your incomings and outgoings.<\/p>\n\n\n\n<p>But one thing you can\u2019t do is keep a paper-based ledger.<\/p>\n\n\n\n<p>Many sole traders simply rely upon accounting software. This means they can issue invoices with ease, reconcile their bank statements against their outgoings, and more. It means they have perfect visibility into their cash flow.<\/p>\n\n\n\n<p>Accounting software also grows with your business and helps you cope with more complex finances.<\/p>\n\n\n\n<p>Using it means your accounting records are always kept in a legally compliant digital way\u2014and for the required period (usually five to seven years). This method removes the worry and stress of managing the data collection yourself through spreadsheets.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-photograph-your-receipts\">2. Photograph your receipts<\/h3>\n\n\n\n<p>Whenever you spend money for your business, you need to record that information as soon as possible.<\/p>\n\n\n\n<p>This is a requirement for basic good accounting, but recording it digitally is a requirement of Making Tax Digital. Digital recording doesn\u2019t mean keeping a digital photo, it means creating digital information that can be used by computer systems.<\/p>\n\n\n\n<p>One of the big advantages of cloud accounting software is the ability to create digital records like those required by MTD, from digital photos. This is often called Optical Character Recognition or OCR.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.sage.com\/en-gb\/accountants\/products\/autoentry\/\">AutoEntry<\/a>, for example, lets you use your phone or a PC and scanner to grab an image of the receipt. The information is then automatically extracted and can be sent straight to your accounting software.<\/p>\n\n\n\n<p>If you buy something in a shop and are handed a paper receipt, you can take a snap of it using your phone.<\/p>\n\n\n\n<p>The information such as the retailer details, amount, date, VAT amount, and so on, will be extracted automatically.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-get-support-with-the-changes\">3. Get support with the changes<\/h3>\n\n\n\n<p>It\u2019s a good idea to get help when first implementing MTD for Income Tax.<\/p>\n\n\n\n<p>Luckily, this kind of help is available on every high street in the form of accountants and tax advisers.<\/p>\n\n\n\n<p>These people have amazing experience of every aspect of tax and running a business, and can advise you on how to both start the MTD-ball rolling in your business and then ensure you\u2019re ready in time for your 2026, 2027 or 2028 deadline.<\/p>\n\n\n\n<p>You can hand off a some of the workload around MTD to your accountant once MTD for Income Tax is up and running but you still need to use software to keep your accounting records digitally.<\/p>\n\n\n\n<p>Your accountant will be able to advise the best way forward, and how best you can work with them.<\/p>\n\n\n\n<p>Contact your software vendor too. They\u2019ll have a massive amount of experience with both tax and, unsurprisingly, accounting software.<\/p>\n\n\n\n<p>As MTD for Income Tax approaches, your accountant or tax adviser will have dedicated support where you can learn if the software you use is MTD-ready, and what Making Tax Digital means for you, too.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-final-thoughts\">Final thoughts<\/h2>\n\n\n\n<p>To paraphrase Mark Twain, reports of the end of the Self Assessment tax return are perhaps premature.<\/p>\n\n\n\n<p>It will remain a legal requirement for many following the start of Making Tax Digital for Income Tax in April 2026.<\/p>\n\n\n\n<p>But for those required to switch to MTD for Income Tax, Self Assessment reporting won\u2019t be required for tax years following April 2026 (although you\u2019ll still need to submit your final Self Assessment return, for 2025\/26, by 31 January 2027).<\/p>\n\n\n\n<p>If you\u2019re someone who hates poring over your Self Assessment tax return each January, the arrival of MTD for Income Tax will surely be welcome.<\/p>\n\n\n\n<p>By creating periodic updates, you\u2019ll find the data you require is already present and correct because you\u2019ve been updating it across the year.<\/p>\n\n\n\n<p>Therefore, submitting your digital tax return by 31 January will be much easier compared to how things are now.<\/p>\n\n\n\n<p>Pretty soon, the Self Assessment tax return will become a forgotten memory\u2014while you reap the benefits of better and clearer accounting that reduces admin and frees up time to do more of what you love.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-frequently-asked-questions-on-making-tax-digital-for-income-tax\">Frequently asked questions on Making Tax Digital for Income Tax<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-if-it-costs-me-too-much-money-to-switch-to-digital-accounting-do-i-still-have-to-declare-tax-for-making-tax-digital\">What if it costs me too much money to switch to digital accounting? Do I still have to declare tax for Making Tax Digital?<\/h3>\n\n\n\n<p>As a sole trader, if you meet the threshold for switching to MTD for Income Tax, you should treat the requirement as a legal obligation.<\/p>\n\n\n\n<p>This means budgeting in your business for expenses related to Making Tax Digital compliance such as hiring an accountant or using a digital accounting software subscription.<\/p>\n\n\n\n<p>Don\u2019t forget, you might be able to <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/allowable-expenses-self-assessment-tax-return\/\">claim certain things back as allowable expenses<\/a>, so make sure you know what can be claimed for, such as the cost of using an accountant, and what can\u2019t.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-can-i-manage-my-making-tax-digital-requirements-myself-rather-than-hire-an-accountant\">Can I manage my Making Tax Digital requirements myself rather than hire an accountant?<\/h3>\n\n\n\n<p>Yes if you keep accurate digital records, usually via cloud accounting software to make it easier to compile and submit your quarterly updates and your digital tax return.<\/p>\n\n\n\n<p>Many digital accounting software providers are aimed at medium to large businesses, so make sure you find one that doesn\u2019t overcharge you for services you won\u2019t need as a sole trader.<\/p>\n\n\n\n<p>There are some limitations around how you keep your records.<\/p>\n\n\n\n<p>For example, using spreadsheets will no longer be acceptable as a way to collate financial information unless you use bridging software to verify the data.<\/p>\n\n\n\n<p>Any on-desktop or paper records must be kept unchanged for several years to ensure the data can be verified, or you\u2019ll risk getting into trouble with HMRC should it ask for your financial data.<\/p>\n\n\n\n<p><em>Editor\u2019s note: This article was first published in January 2022 and has been updated for relevance.<\/em><\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">E-Book: Your Guide to MTD for Income Tax<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>Our free guide is written by experts and is all you need as a sole trader or landlord to understand what MTD means for your business\u2014and how to ensure you&#8217;re ready in time.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n<p><!-- wp:paragraph --><\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-626d6b26-aa95-4f75-a5a0-9cce8bff833f\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Get Your Guide to MTD for Income Tax<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"800\" height=\"450\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/10\/cta-mtd-guide.jpg\" class=\"single-cta__image\" alt=\"A woman reading a guide about MTD for Income Tax\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/10\/cta-mtd-guide.jpg 800w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Join more than 500,000 UK readers and get the best business admin strategies and tactics, as well as actionable advice to help your company thrive, in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b1a63862-3fa0-4a5e-bb67-c76b88bbc6b8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Get the lowdown on how Making Tax Digital will change the way sole traders submit tax returns, and what that means for Self Assessment.<\/p>\n","protected":false},"author":280,"featured_media":11375,"menu_order":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[6,9],"tags":[23,135,30,206],"business_type":[4],"lilypad":[],"context":[],"industry":[],"persona":[75],"imagine_tag":[220,289,77,142,334,200,170,727,109],"coauthors":[369],"class_list":["post-10470","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","category-strategy-legal-operations","tag-bookkeeping","tag-business-finances","tag-mtd-business","tag-need-to-know","business_type-small-business"],"sage_meta":{"region":"en-gb","author_name":"Keir Thomas-Bryant","featured_image":"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-857939374_updated.jpg","imagine_tags":{"220":"Accountant accounting","289":"Accounting and 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