Sole traders
MTD for sole traders
If you're self-employed — freelancer, contractor, or running your own business — Making Tax Digital will change how you report your income to HMRC. Here's what you need to know.
Does MTD apply to me as a sole trader?
MTD ITSA applies to you if your gross self-employment income — before expenses — exceeds the qualifying threshold. The rollout is phased:
If you also have rental income, both self-employment and property income count towards the threshold. For example, £30,000 freelance + £25,000 rent = £55,000 qualifying income, which puts you in scope for April 2026.
What changes for sole traders under MTD?
Before
One annual Self Assessment return (31 Jan deadline)
After MTD
4 quarterly updates + year-end Final Declaration
Before
Records kept in any format
After MTD
Digital records required (software, spreadsheet, or bridging)
Before
Can file via HMRC's online portal
After MTD
Must use approved MTD-compatible software
Before
Report income once per year
After MTD
Submit running totals every quarter
Quarterly update deadlines for sole traders
Each quarter you must submit income and expense totals from the start of the tax year up to the end of that quarter (cumulative figures, not just the quarter alone).
| Quarter | Period | Due date |
|---|---|---|
| Q1 | 6 Apr – 5 Jul | 5 Aug |
| Q2 | 6 Jul – 5 Oct | 5 Nov |
| Q3 | 6 Oct – 5 Jan | 5 Feb |
| Q4 | 6 Jan – 5 Apr | 5 May |
A Final Declaration (replacing the SA100) must then be submitted by 31 January following the tax year end. This is where you add any additional income sources and claim reliefs.
What income and expenses do sole traders report?
HMRC maps your business figures to SA103 (Self Employment) tax boxes. The main categories are:
Income
- Turnover (gross sales / fees)
- Other business income
Expenses (allowable)
- Cost of goods / materials
- Wages and staff costs
- Car, van & travel
- Premises & utilities
- Repairs & maintenance
- Professional fees
- Advertising & marketing
- Other allowable expenses
If your annual turnover is below £90,000 you may use consolidated expenses instead of itemised categories.
Can I keep using my spreadsheet?
Yes — if you use bridging software. HMRC requires digital record-keeping and API submission, but you don't have to move your bookkeeping into dedicated accounting software. Bridging tools let you:
- Keep your existing Excel or Google Sheets setup
- Export a CSV at the end of each quarter
- Upload to the bridging tool which submits to HMRC on your behalf
ArcTax supports bridging for sole traders
Upload your CSV, map your income and expense categories, and submit directly to HMRC. Or connect fully and enter figures in-app.
Try ArcTax free