If your turnover is climbing, Making Tax Digital for sole traders is about to change how you run your business. From 6 April 2026, HMRC will require self-employed people and landlords with annual business or property income over £50,000 to keep digital records. You must also send quarterly updates through MTD-compatible software (HMRC’s MTD guidance). You still file an annual final declaration, but the January ritual of dumping a year’s receipts on your accountant is ending. For many self-employed women, this is the biggest shift in tax admin since Self Assessment began. The upside? You see your tax position throughout the year instead of guessing until the following January.
What Making Tax Digital means for sole traders
Making Tax Digital for Income Tax Self Assessment, known as MTD for ITSA, is HMRC’s programme to move tax reporting online. Instead of filing one Self Assessment tax return after the tax year ends, you record income and expenses digitally as they happen. You then submit four quarterly updates. At the end of the tax year you send an end-of-period statement and a final declaration.
For a sole trader, the change affects how you report trading income. Under the MTD for ITSA rules, you do not pay tax more often. The quarterly updates are information returns, not tax bills. Your two main payments on account still fall on 31 January and 31 July (HMRC’s Self Assessment deadlines). The difference is visibility. HMRC sees your income pattern throughout the year. This gives you a clearer picture of what you owe before the final bill arrives.
Digital records do not mean scanning every paper receipt and calling it done. HMRC expects you to record the original transaction digitally in software that can send data through its API. You can still keep paper receipts as backup, but the primary record must be electronic.
Who must join MTD for ITSA in 2026/27
The threshold uses your gross qualifying income, not your profit. From 6 April 2026, you must join MTD if your annual income from self-employment, property, or both is more than £50,000. If your income is between £30,000 and £50,000, you must join from 6 April 2027. HMRC has not yet set a mandatory date for those below £30,000. However, it has said any extension will be no earlier than April 2028 (HMRC’s MTD for ITSA guidance).
When you work out whether you meet the threshold, use your gross income before any expenses. If you invoice £55,000 but spend £20,000 on stock and travel, your qualifying income is still £55,000. The test looks at the money coming in, not what is left after costs.
If you have both trading and property income, add them together. A freelance consultant with £45,000 of client income and £8,000 from a buy-to-let property crosses the £50,000 threshold. Many women run portfolio businesses, so it is worth checking every income stream. A therapist, designer, or online trader with £35,000 of trading income does not have to join until 2027/28, though they can sign up voluntarily.
Existing Self Assessment rules still apply while you wait. You must continue filing your tax return and paying by the usual deadlines. Missing the MTD sign-up window can leave you scrambling for software and support at the busiest time of year.
Your quarterly MTD for ITSA checklist
The quarterly updates cover the three-month periods ending 5 July, 5 October, 5 January, and 5 April. You must submit each update by 5 August, 5 November, 5 February, and 5 May (HMRC’s quarterly update guidance). Put these dates in your diary now. Late submission penalties can build up quickly.
- Collect every sale. Record invoices, cash takings, card payments, and any income in kind. If you use accounting software, link your business bank account and check the feed matches your records.
- Capture allowable expenses. Keep digital receipts for travel, stock, professional subscriptions, phone use, and home-working costs. HMRC can ask to see evidence years later.
- Reconcile your bank. Match each transaction to an invoice or receipt before you submit the update. This catches duplicates and missing payments early.
- Review your profit estimate. Your software will show a running total of income minus expenses. Set aside roughly 25-30% of taxable profit for income tax and Class 4 National Insurance. Adjust the amount when you know the exact figures.
- Submit by the deadline. Check the summary in your MTD software before you press send. A rushed submission is harder to amend later.
- Save a copy. Export or screenshot the submission confirmation and store it with that quarter’s records.
Many self-employed women have seasonal or lumpy income. A wedding supplier might earn most of her income between April and September; a retail business may see a surge before Christmas. Quarterly reporting shows those spikes as they happen. You can set money aside during busy months instead of facing a surprise bill in January.
Software, the end-of-period statement, and the final declaration
Choosing MTD-compatible software is not optional. You cannot simply type figures into a spreadsheet and submit them by email. Your software must connect to HMRC’s systems through an API. Options include FreeAgent, QuickBooks, Xero, Sage, and several lower-cost packages aimed at small traders. HMRC publishes a list of recognised suppliers on gov.uk.
When you compare packages, check that the software handles both quarterly updates and the end-of-period statement. Look for bank feeds, receipt capture, and the ability to invite your accountant. Some providers offer free trials or tiered pricing for businesses below the VAT threshold.
After the tax year ends on 5 April 2027, you must submit an end-of-period statement by 31 January 2028. This statement confirms your annual trading total and claims allowances such as the trading allowance or capital allowances. If you have property income, you submit a separate statement for that source (HMRC’s end-of-period statement guidance).
Then comes the final declaration, also due by 31 January 2028. This replaces the traditional Self Assessment tax return. It brings together your trading income, property income, employment income, dividends, savings interest, and any other taxable income. Your software will help populate many of these boxes, but you remain responsible for the accuracy of the figures.
Mistakes that catch self-employed women out
Quarterly reporting exposes habits that used to be easy to fix at year end. One common error is using a personal bank account for business income. It slows reconciliation and makes it hard to prove which expenses were business costs. Open a separate business account before you start quarterly reporting.
Another pitfall is forgetting property income. If you let a room or own a rental property, include that income when you calculate whether you meet the threshold. Even if trading income is below £50,000, property income can push you over.
Some women also assume that MTD replaces record-keeping for VAT. It does not. If you are VAT registered, your VAT returns follow separate MTD for VAT rules. Your income tax quarterly updates are a different process.
Finally, do not wait until the first deadline to choose software. Migration takes time, and support teams are busiest in April and January. Start your free trial in late 2026. This gives you time to test bank feeds and expense capture before the 5 April 2027 quarter begins.
Where to find help with MTD for ITSA compliance
HMRC publishes detailed guidance on gov.uk, including a list of MTD-compatible software and a step-by-step sign-up process. If your affairs are straightforward, a good software package and a few hours of training may be enough.
If you have multiple income streams, employ people, or are nearing the VAT threshold, consider paying an accountant or bookkeeper. Their fee often pays for itself in saved tax and avoided penalties. Look for someone who is already familiar with MTD for ITSA. They should also show you how to use the software yourself over time.
If you want your accountant to file on your behalf, authorise them as your agent through your HMRC online account. Do this well in advance; delays in agent authorisation can lead to missed deadlines in the first quarter.
If you are unsure whether staying a sole trader is still the right structure, compare the tax and reporting duties with a limited company. Our guide to sole trader versus limited company sets out the main differences.
For a broader view of tax rates and Self Assessment duties in the current year, read our Self-Employed Tax UK guide. You can also explore the wider picture for UK women in business on our women in business facts page and find practical support for running your company in our business admin guide.
