Approximately 3.1m sole traders power the UK economy, making up 56% of the private‑sector business population (DBT, 2024). For most, self assessment has meant a single January rush. That is about to change. From 6 April 2026, HMRC’s Making Tax Digital for income tax (MTD IT) will apply to sole traders and landlords whose qualifying income from 2024/25 tops £50,000; a further wave joins in 2027 when the threshold falls to £30,000 (HMRC press release, 2025). HMRC expects about 780,000 people to enter the system in the first year, followed by another 970,000 the year after.
The aim is clear: digital records, quarterly updates and a single end‑of‑period statement should mean fewer errors and more up‑to‑date tax positions. Still, the timetable, the jargon and the software market can feel overwhelming. We support sole traders nationwide – entirely online – so we have been hands‑on with the pilot since day one. Our verdict? Start early, and the 2026 deadline becomes just another diary note, not a cliff edge. This guide sets out who is caught, what “qualifying income” really means and seven practical actions you can take right now. We’ve got this.
Who is caught by MTD IT from April 2026?
For the 2024/25 tax year HMRC will look at your self assessment return and calculate your qualifying income (gross turnover before expenses) from self‑employment and UK property. If it is over £50,000, you must join MTD IT from 6 April 2026. The letters confirming this started landing in spring 2025 (HMRC guidance).
If your income sits between £30,000 and £50,000 you have another year – but take the chance now to observe, test software and tidy your bookkeeping. Everyone else can join voluntarily; early adopters benefit from penalty‑free testing and extra HMRC support during the pilot.
Understanding “qualifying income”
“Qualifying income” is not your taxable profit – it is your total gross turnover from:
- self‑employment trades
- UK furnished or unfurnished property lettings.
Income from partnerships, dividends, interest or overseas property does not count towards the threshold. HMRC checks each source separately, then adds the two together. If either trade or property has been active for only part of the year, you still use the actual receipts for that period – no need to annualise.
Tip: Keep a running total on your bookkeeping dashboard. If you see turnover edging towards £50k for 2024/25, call us. An early heads‑up leaves time to choose software, sign up for the pilot and map new quarterly routines.
Seven practical actions to take this year
- Choosing software: Select an HMRC‑compatible package (Xero, QuickBooks, FreeAgent or similar) and test the mobile app. We can help through Blue Shore’s digital accounting service.
- Joining the pilot: Register with HMRC’s pilot once your software is connected. Early submission deadlines are soft – a safe space to practise.
- Quarterly bookkeeping checkpoints: Close your books within 10 days of each quarter end. We offer fixed‑fee reviews so numbers are submission‑ready.
- Digital record capture: Photograph receipts, connect bank feeds and label transactions as you go. That removes the January shoe‑box panic.
- Basis‑period review: 93% of sole traders already use 6 April–5 April year ends, but if you are in the 7% that do not (HMRC research, 2025), aligning now will save headaches.
- Separate business bank account: Clean data in equals clean data out – and cheaper accountancy bills.
- Talk to your accountant: We can set up your software, manage the pilot submissions and keep an eye on HMRC letters.
Picking software that works for you
Your options fall into three camps.
- Off‑the‑shelf cloud apps offer bank feeds, receipt capture and one‑click quarterly updates. They suit most sole traders.
- Industry‑specific tools (for trades, creatives or lettings) bolt on to bookkeeping engines. They streamline quoting, job tracking and mileage.
- Bridging software links spreadsheets to HMRC. It is legal, but you still need digital records – and spreadsheets can break.
We recommend cloud apps for resilience and real‑time insight.
Life after the end‑of‑period statement
The annual self assessment tax return is replaced by an end‑of‑period statement (EOPS) for each trade or property business, plus a final declaration covering everything else (employment, dividends, pensions).
The EOPS uses the same 31 January deadline, so the tax timetable you know does not vanish – it just spreads the workload. Keep your payments on account diary untouched.
Ready to go digital?
The proportion of sole proprietors among VAT/PAYE‑registered businesses has fallen to 14.6% as incorporated firms rise (ONS, 2024). That makes the sole traders who remain even more visible to HMRC. Embracing MTD IT early turns compliance into an advantage: sharper numbers, stronger pricing decisions and no last‑minute scrambles.
This is not just a software switch – it is a mindset shift. Quarterly reporting means you will have a clearer picture of business performance all year round. That helps with tax planning, cashflow management and even funding applications, because lenders prefer up‑to‑date figures. Waiting until the final months before April 2026 could leave you juggling system training, historic data migration and new bookkeeping routines when HMRC deadlines are looming.
If your turnover for 2024/25 will exceed £50k, now is the moment to act. Get in touch and we will map your next steps. Visit Blue Shore’s contact page or drop us a message – let’s make digital tax effortless for sole traders.
