Making Tax Digital: What’s Changing for Sole Traders?

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If you're currently managing your accounts using spreadsheets, paper records, or more traditional accounting methods, Making Tax Digital will bring some significant changes to how you handle your finances.

The most important update is that digital record keeping for Income Tax will become mandatory for self-employed businesses and landlords from April 2026. This means you’ll need to switch to HMRC-approved accounting software to record and store all your income and expenses. Excel spreadsheets and paper receipts will no longer be acceptable.

In addition, you’ll no longer submit just one tax return per year, rather you’ll need to send tax updates to HMRC on a quarterly basis. This means four submissions throughout the year, followed by a final declaration at the end of each tax year. To stay compliant, you’ll need to maintain accurate digital records of your business transactions and make sure your software remains up to date and compatible with HMRC’s system.

While it may sound like more work, once the right systems are in place, the process becomes quicker and more streamlined than traditional tax reporting. In HMRC’s February 2025 review of MTD for VAT, 45% of respondents reported saving time - with average savings estimated at up to 40 hours per business each year. In addition, 58% of companies using fully integrated software noted that their VAT return process became noticeably quicker.

Common mistakes to avoid

As with any major change, transitioning to MTD for sole traders isn’t without its pitfalls. With the first deadline approaching in April 2026, now is the time to begin getting your systems in place. You will need fully compliant software that integrates with HMRC's system.

Some businesses underestimate the importance of keeping records up to date. Quarterly submissions mean you can't leave everything until the last minute - perhaps a mindset shift that might take some getting used to. Finally, around one-fifth of sole traders assume they can go it alone without support, only to find themselves overwhelmed by changes. 

How DL Accounts can support sole traders

Don’t wait until the Making Tax Digital deadlines sneak up on you - act now to ensure a smooth transition. Whether you're ready to sign up, or simply want to explore your options, as a leading accountant in Cornwall, we're here to help. DL Accounts specialises in helping clients to understand the world of digital tax returns. We’ve worked with businesses of all sizes who may not have the time or confidence to manage MTD alone.

Our latest compliance solutions are designed specifically for individuals who need to register under HMRC’s new rules. When you join us, you’ll receive a tailored package that includes everything you need, including free access to Dext Solo, our trusted software partner. It allows you to track expenses, upload receipts by taking a picture, and handle mileage and CIS deductions. HMRC-compliant, it fully supports all the record keeping you’ll need under the forthcoming changes.

We set everything up for you, provide comprehensive training and offer ongoing support when required. When you're looking for trusted tax services in Cornwall, we’re here to make life easier.

Does everyone need to use MTD for income tax?

Not everyone is required to comply with the changes right away. If your qualifying income is currently £20,000 or less, you don’t need to sign up just yet, although this may change in future phases. Compliance isn’t required if you’re exempt from using digital services due to age or disability, or you’re in a location where digital access is limited. If you’ve applied for a specific exemption and HMRC has approved it, you're not required to follow the MTD rules. If you’re unsure whether you meet the criteria or when you’ll need to comply, our team can help assess your eligibility and prepare accordingly. We also provide a simple tool on our website to help determine if MTD applies to you.

Change is never easy, especially when it comes to your finances. However, with the right support and software in place, the transition to Making Tax Digital can be smooth, stress-free and beneficial. Our expert team is ready to help, so get in touch with DL Accounts today and make a positive move towards a more efficient future.