Making Tax Digital is expanding – here’s what sole traders need to know
A significant change is on its way for sole traders, with new rules set to reshape how income is reported and managed.
From April 2026, individuals with annual earnings over £50,000 will be required to comply with Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA).
A year later, that threshold drops to £30,000.
By 2028, anyone earning above £20,000 as a sole trader will need to follow the new process.
In real terms, that’s hundreds of thousands of tradespeople, creatives, and independent professionals who will need to adjust – including those who may never have considered themselves part of the digital tax system.
Why does this matter now?
Although full implementation is still a few years away, early preparation could save you a great deal of stress.
The new system demands consistent record-keeping throughout the year, replacing the once-a-year tax return with quarterly updates.
The aim is to simplify tax reporting and encourage real-time bookkeeping.
However, for small business owners already managing everything from marketing to client work, the extra admin could quickly become a burden.
Planning ahead is key
It’s no longer just about meeting one annual deadline – you’ll now have four to consider, spaced out throughout the year.
With that comes a greater risk of falling behind, especially if you’re not already keeping digital records.
Missing those deadlines could prove costly.
Under the updated penalty structure, late filings will incur rising charges the longer they are overdue – starting at three per cent and reaching up to ten per cent after 31 days.
For those operating on tighter margins, those figures could make a real difference.
What can you do?
If you are not yet using digital tools to manage your finances, now is the time to explore your options.
Automating your bookkeeping, using accounting software, or working with a professional can reduce the risk of errors and help you stay compliant.
You do not need to navigate the transition alone.
Whether you want to understand your obligations or get help setting up digital systems, our team is here to support you.
Get in touch today to start preparing – and take the pressure off your future self.
