MTD for Income Tax for sole traders
Self-employed and registered for Self Assessment? Here is what MTD for Income Tax means for you, from GOV.UK's guidance.
Not tax advice. This site explains GOV.UK guidance in plain English. Your own position depends on your tax returns and circumstances. Check GOV.UK or ask an accountant before you act.
Does it apply to you?
Your qualifying income is your self-employment turnover (before expenses) plus any gross property income. Over £50,000 in 2024 to 2025 means MTD from 6 April 2026, over £30,000 in 2025 to 2026 means April 2027, and over £20,000 in 2026 to 2027 means April 2028. Wages from a job do not count. Use the checker.
New in business with a short first year? HMRC annualises your income: GOV.UK's example doubles 6 months' trading to find your qualifying income (GOV.UK).
More than one business
Each self-employment is a separate business under MTD. GOV.UK's example is an electrician who is also a driving instructor: they keep one set of digital records for each and send separate quarterly updates for each (GOV.UK). You only get one penalty point per deadline, even if several updates are late.
The £1,000 trading allowance
If you claimed the trading income allowance on your last return, you still keep digital records and include them in your updates, then claim the allowance on your tax return. You do not need MTD records for self-employment income if it was below the allowance threshold and you did not declare it on your last return (GOV.UK: digital records; the allowance).
Simpler records under £90,000
If turnover from a self-employment is under £90,000 you can categorise records in less detail: GOV.UK says sole traders only need to record whether each transaction is income or an expense. If turnover reaches £90,000 you must fully categorise everything for that business from the start of the tax year.
Construction (CIS) subcontractors
CIS deductions taken by contractors still go on your tax return. HMRC's software finder shows which products support “Construction Industry Scheme” in the tax return, so filter for it on the sole trader software page. To check the deductions on your invoices, use UK CIS Calc.
VAT registered
If you are VAT registered you already use software for VAT. GOV.UK suggests checking whether it also works for MTD for Income Tax, or that your new software can handle your VAT (GOV.UK). Penalty points for VAT and Income Tax are kept separately.
Your dates
Quarterly updates are due 7 August, 7 November, 7 February and 7 May, and your tax return and bill by 31 January. See your full timetable.
Questions
I am employed and run a side business. Do I need MTD?
Only your side business turnover (plus any property income) counts. If that is over the threshold, you need MTD for that income. Your wages still go on your tax return as usual.
Do I need an accountant?
No, you can do it yourself with compatible software. An agent can also sign you up and send updates for you.
Can I use my bank's app?
Some banks' accounting tools are on HMRC's list. Search the software comparison for your bank's name.