Don’t panic! A sole trader’s guide to MTD for Income Tax (April 2026 deadline)

As Douglas Adams might’ve said: don’t panic about Making Tax Digital (MTD) for Income Tax.

But don’t ignore it either.

From April 2026, if you’re a sole trader earning over £50,000, the way you file tax through Self Assessment will change.

You’ll need to file it online, keep digital records, and send quarterly digital updates under Making Tax Digital (MTD) for Income Tax.

It’s the biggest Income Tax shake-up in 30 years, but it’s not a new tax. It’s just a smarter way of reporting it.

The good news? You still have time to get ready.

This quick guide explains what’s changing, how to avoid last-minute chaos, and how to stay calm and compliant.

Here’s what we discuss:

What is MTD for Income Tax? (The short version)

Right now: You keep records however you like and file one big tax return in January.

From April 2026: If your gross income is over £50,000 from sole trade or property income, you must:

1. Keep your records digitally.
2. Send quarterly updates (at least 4 times a year, although more frequently gives you better insight into your cash flow and tax liability).
3. Sign a final digital tax return at year-end.

That’s it! Here are more details on how it affects Self Assessment and how you can make the best of it.

If you need comprehensive details on the history of MTD for Income Tax, here is the complete guide.

Mostly harmless? The myths around MTD

At the Accountex North event in Manchester during September 2025, a lot of the conversation was about MTD confusion.

Many sole traders are hearing rumours that simply aren’t true.

Let’s set the record straight by addressing some assertions.

“I’ll have to pay tax four times a year.”

Myth.

Your tax payment dates stay the same: 31 January and 31 July (with the latter date relevant only if you’re paying on account).

What changes is how often you update HMRC, not how frequently you pay.

You or your accountant/bookkeeper will send short quarterly summaries of income and expenses through software, not four full tax returns.

“I can wait until HMRC forces me to sign up.”

Myth.

You’ll need to take action yourself – HMRC won’t automatically do everything for you.

Waiting means you’ll lose control, facing possible penalties, and getting caught in the last-minute rush when support lines are at their busiest.

In short: don’t wait to be forced. Start on your own terms. It’s the simplest way to stay ahead and avoid the last-minute panic.

“It’ll be impossible to manage – too much work.”

Myth.

In fact, the opposite is true.

Accountant Rebecca Benneyworth told the audience at Accountex North: “By keeping things digital all year, my clients know their tax position – there’s no panic in January.”

Quarterly updates are short and cumulative, so by the time January rolls around, your return is 90% complete.

Doing a little, often, saves a lot.

“Software choice is limited or expensive.”

Myth.

Perhaps that was once true. No longer. Sage Accounting Individual is free of charge, for example.

Also speaking at Accountex, Craig Ogilvie, Director of Making Tax Digital at HMRC, confirmed that the software market has exploded: “You’ve got choice – different products, different price points, even free and bridging options.”

Whether you use full accounting software, a simple bookkeeping app, or a low-cost bridging tool, there’s something that fits how you already work.

“I can’t change how I account once I start.”

Myth.

You absolutely can.

When asked if switching from cash to accruals accounting would be possible, Ogilvie replied: “You can change it after you submit your fourth quarterly update.”

So, you’re not locked in. Flexibility is built in.

“It’ll break everything I already do for VAT.”

Myth.

It’s designed to align.

HMRC confirmed that MTD for Income Tax follows the same digital approach as VAT.

So, if you already file VAT digitally, you’re halfway there.

Think of it as one joined-up digital system, not a second set of hoops to jump through.

“It’s just another burden from HMRC.”

Myth.

HMRC’s goal is long-term simplification.

As Jonathan Athow, Director General, Customer Strategy and Tax Design at HMRC, put it when speaking at Accountex: “Keeping records closer to real time helps people get their tax right.”

The aim isn’t extra admin. It’s fewer mistakes, better forecasting, and less last-minute stress.

Why acting now makes life easier (and ignoring HMRC doesn’t)

It makes sense to get started now, not in 2026. Waiting until HMRC forces you to switch risks stress, errors, and last-minute chaos.

Here’s what changes – and why it actually makes life easier:

• Same tax, fewer surprises. You’ll still pay tax on the same income by the same 31 January deadline – but you’ll have real-time visibility instead of a year-end scramble.
• Short, simple updates. Quarterly submissions are quick summaries of income and expenses based on your bank statements, not full tax returns. Each update gives you an up-to-date tax estimate from HMRC.
• Avoid the January panic. By keeping records digitally throughout the year in software, your tax return is essentially done already – no more shoe box of receipts.
• Cleaner books and better cash flow. Digital records mean fewer mistakes, faster invoicing, and a clear picture of what to set aside each month. More control, less stress.

Early adopters are spreading the learning curve over months, not days – freeing up time to focus on business rather than compliance.

What experts are saying about MTD for Income Tax

Here’s some select quotes from expert voices speaking about MTD for Income Tax at the Accountex North event.

Don’t sit back and wait to be forced. Act now, or you’ll risk being overwhelmed.

Amy Copeland, CEO, Institute of Certified Bookkeepers (ICB)

It’s a no-brainer. The irony is MTD actually takes work away from you.

Jonathan Dowden, Product marketing director, Sage

Clients find tax forecasts really useful – it stops those awful surprises.

Rebecca Benneyworth FCA, Rebecca Benneyworth & Co

We’ve been preparing clients for MTD for years. Digital bookkeeping isn’t something to fear. It’s protection and clarity.

Laura MaCarthy, Your Virtual Digital Bookkeeping Team

The bottom line? Start now, and MTD becomes routine – not a rush. You’ll have fewer mistakes, less stress, and more time to run your business.

What’s changing now and what comes next?

MTD for Income Tax is simply a new, digital way to record and report what you already do.

The rollout is phased:

• April 2026: £50,000+ gross income (sole traders and landlords)
• April 2027: £30,000+ gross income
• April 2028: £20,000+ gross income.

What you’ll need to do:

• Keep your records digitally using MTD-compatible software.
• Send updates at least quarterly (7 Aug, 7 Nov, 7 Feb, 7 May).
• Submit your final return through the same software.

What stays the same:

• Tax rules: You’re reporting the same income and expenses, and the same accounting record details.
• Payment deadlines: Still 31 January and, if you pay on account, 31 July.
• If you earn under £20,000, things won’t change for now, but you can still sign-up to MTD voluntarily and benefit from it.

HMRC’s done this before. Making Tax Digital for VAT was launched back in 2019, and hundreds of thousands of businesses now file smoothly through digital tools. This next phase extends that same simplicity to Income Tax.

A quick MTD action plan: Your rehearsal year, no panic required

If you’re a sole trader, here’s how to get ahead of Making Tax Digital right now – no jargon, no panic.

1. Pick your software: Choose an HMRC-approved tool. Sage Accounting Individual is one option, but there are other free or low-cost alternatives.

You have choice. MTD doesn’t mean one product.

Jonathan Athow, Director General for Customer Strategy and Tax Design, HMRC

2. Start logging income and expenses: Treat it like practice. Enter a few recent transactions and see how simple it is.
3. Connect your bank: Link your business account so transactions flow in automatically. Categorise them as you go – modern apps even learn your patterns and speed things up.
4. Submit a dummy quarterly update: Join the HMRC pilot in 2025 or send test updates.

Testing is open and there are no penalties – we want people to get used to it.

Jonathan Athow

5. Review your real-time tax estimates: Each update gives you a live forecast – helping you plan cash flow and avoid January surprises.
6. Get support if you need it: Bookkeepers and accountants can help. The ICB alone has over 3,200 certified practices ready to assist.

Think of 2025/2026 as your rehearsal year. You’ll iron out any kinks, build good habits, and by April 2026, you’ll be ready to file for real – calm, confident, and digital.

HMRC’s vision: Why digital is inevitable

MTD for Income Tax isn’t a one-off compliance task. It’s part of HMRC’s long-term plan to modernise tax for everyone.

By 2030, HMRC wants 90% of all interactions to be digital (up from 76% today).

That means fewer phone calls and paper forms – and more taxpayers managing everything through apps and software.

Our digital services have around 80% customer satisfaction – higher than most other channels.

Jonathan Athow

Digital tax is more efficient. It reduces errors, saves money, and gives people more confidence that their returns are right.

Keeping records closer to real time helps people get their tax right.

Jonathan Athow

MTD for Income Tax is only the beginning. Expect to see more automation, pre-filled returns, and connected tools that simplify taxes year after year.

For sole traders, the message is clear: digital isn’t optional. It’s inevitable.

Start now and you won’t just be ready for April 2026. You’ll be future-proofing your business for whatever comes next.

Final thoughts: Lead, don’t lag

As a sole trader, you always have loads on your plate, such as admin, marketing, invoicing, and delivery. Don’t add MTD at the last minute.

If you become an early mover, you will:

• Spread the learning curve over months, not days.
• Get support while it’s available, before demand spikes.
• Run smoother businesses with better visibility.
• Stay in control rather than being forced into change.

“Do you want to be ahead of the game and in control – or drowning in January with a shoebox of receipts?”

Amy Copeland

You don’t have to love Making Tax Digital. You just need to be ready.

Start now: pick your software, connect your bank account, log your first expense.

By April 2026, you’ll wonder what the fuss was about.

Get your software ready, stay digital, and above all: Don’t panic.