Making Tax Digital (MTD) for Sole Traders — What You Need to Know

Introduction

Making Tax Digital (MTD) is HMRC’s long-running programme to modernise the UK tax system.
For sole traders, it means moving away from paper-based returns and ensuring that tax information is submitted using approved digital software.

Although MTD has been rolled out in stages, and some deadlines have changed over time, the direction is clear: all sole traders will eventually need to comply with digital tax submission rules.
This guide explains what MTD is, what it means for you, and how QTax ensures you stay compliant.

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What Is Making Tax Digital?

Making Tax Digital is HMRC’s initiative to reduce errors and make tax administration more efficient by requiring the use of digital tools for tax reporting.

HMRC’s goal

MTD aims to:

• reduce mistakes caused by manual calculations
• simplify submissions
• encourage more accurate, real-time record keeping
• move the tax system fully online

Who MTD applies to

MTD will eventually apply to:

• all sole traders
• landlords
• VAT-registered businesses (already required to comply)
• limited companies

For Phase 1 of MTD for Income Tax (MTD ITSA), only certain groups will be mandated first.

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When Will MTD Apply to Sole Traders?

Current MTD ITSA timeline

As of now:

• Sole traders with income over £50,000 will join MTD ITSA from April 2026.
• Sole traders with income over £30,000 will join from April 2027.
• HMRC has paused mandating MTD ITSA for those with income below £30,000, but this is expected to change in the future.

Who is exempt for now?

You are temporarily exempt if:

• your sole-trader income is below £30,000
• you fall under special categories (age, disability, digital exclusion)

But even if you're not yet required to use MTD, you can still file digitally — and most sole traders already do.

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What MTD Requires

1. Digital records

MTD requires businesses to maintain records in a digital format.
For Phase 1 of QTax, this simply means you enter your income and expenses digitally before filing.

2. MTD-compatible software

To submit your return, you must use HMRC-recognised software.
Manual entry via HMRC’s website will eventually be phased out for self-employed individuals.

3. Quarterly updates (future requirement)

Quarterly updates will become mandatory only when full MTD ITSA comes into effect for your income level.
For Phase 1 of QTax, this requirement does not apply yet.

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Why MTD Matters for Sole Traders

Reducing errors

A large percentage of tax return mistakes come from manual calculations or outdated recordkeeping. Digital submissions reduce this risk.

Keeping you compliant

MTD will become mandatory — adopting digital filing early means no surprises when deadlines shift.

Saving time

Digital tools remove repetitive admin tasks, highlight missing information, and prompt you to avoid common mistakes.

Better visibility

Even basic digital tax tools give sole traders a clearer view of estimated tax due.

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How QTax Supports MTD Requirements

Fully HMRC-recognised software

QTax submits Self Assessment returns directly to HMRC using secure, MTD-compatible technology.
This ensures you stay compliant with current and future digital-submission standards.

Clear digital process

QTax guides you step by step through your tax return, helping you enter your information digitally in a clean, structured way.

Ready for future MTD phases

Although quarterly updates are not required yet, QTax is being built with future MTD obligations in mind.
When regulations expand, you’ll already be using software that is equipped to support the transition.

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FAQs

Do I need to comply with MTD right now?

Only if your business is VAT-registered.
For income tax, MTD will become mandatory starting from April 2026 depending on your income level.

Do I still need to keep receipts?

Yes. HMRC may request evidence during a compliance check, even under digital filing.

Can I use spreadsheets under MTD?

Spreadsheets may be allowed only if they connect through approved MTD bridging software.
Using dedicated MTD-compatible tools like QTax is the simplest approach.

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Conclusion

Making Tax Digital isn’t something to worry about — but it is something to prepare for.
Even if you’re not yet mandated to comply, shifting to digital filing early makes life easier and ensures you’re ready when the rules change.

QTax already supports MTD-compatible Self Assessment submission, giving you a straightforward way to stay aligned with HMRC requirements.