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what do i need to do for making tax digital as a sole trader
CHECK IF AND WHEN YOU ARE DUE TO START MAKING TAX DIGITAL
You can check whether you need to start Making Tax Digital by reviewing the gross income reported on your 2024/25 Self Assessment tax return. If your combined income from self-employment and/or property exceeds £50,000, you are expected to join from April 2026, with lower thresholds applying from April 2027
HOW TO REGISTER FOR MAKING TAX DIGITAL
Once you meet the income threshold, you must register for Making Tax Digital directly with HMRC through your Government Gateway account..
CHOOSE MTD COMPATIBLE SOFTWARE
.To meet Making Tax Digital requirements, you will need compatible accounting software, or a spreadsheet connected to approved bridging software. Using the correct digital system ensures accurate record keeping and smooth quarterly submissions.
DIGITAL RECORDS
Maintaining digital records is essential under Making Tax Digital. By recording income and expenses accurately within compatible software, you remain compliant with HMRC requirements while gaining a clearer understanding of your financial performance.
QUARTERLY UPDATES
Under Making Tax Digital, you must submit income and expense summaries to HMRC every three months using approved software. These regular updates help ensure ongoing compliance and give you a clearer view of your tax position as the year progresses.
If you receive both self-employment and rental income, separate quarterly submissions are required for each source. This means you will have two sets of updates to file during each reporting period
FINAL DECLARATION
The Final Declaration covers your full tax year income and allowable expenses, bringing together your quarterly updates and confirming your overall tax position. It also includes any additional income such as dividends, interest or other sources, along with necessary year-end adjustments to ensure accurate reporting to HMRC.
MTD ITSA STARTING APRIL 2026 CONTACT US FOR ADVICE
Under Making Tax Digital, digital bookkeeping means maintaining your business records in a digital format. This can be done using MTD-compatible accounting software, or by keeping records in a spreadsheet that links to approved bridging software for submission to HMRC.
This includes:
• Recording daily sales and income accurately within your software or spreadsheet
• Recording business expenses as they arise and categorising them correctly
• Using bank feeds to import transactions directly into your software for easier matching and reconciliation (bank feeds are not mandatory, but they can save time and reduce errors)
• Storing digital copies of receipts and invoices by scanning paper documents or uploading electronic versions. While keeping digital copies is advisable for organisation, original paper records should still be retained and properly filed
• Keeping records up to date throughout the year, rather than waiting until year end, to allow accurate quarterly submissions
Tip: Many software providers offer mobile apps, allowing you to photograph receipts and record expenses quickly while on the move.
Expert Accounting Services for Your Business
FIND OUT MORE ABOUT MTD PACKAGES
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Making Tax Digital Support Packages
Making Tax Digital (MTD) changes how sole traders and landlords report income to HMRC. Quarterly updates and digital record keeping will replace the traditional once-a-year process for those within the income thresholds.
We offer structured support packages depending on how involved you would like us to be in managing your compliance.
Package 1 – Final Declaration Only (DIY Option)
Suitable for organised clients who manage their own digital bookkeeping and submit their own quarterly updates.
You:
• Maintain digital records using compatible software or spreadsheet
• Submit your own quarterly updates to HMRC
We:
• Review year-end figures
• Complete and submit the Final Declaration
• Include other income such as dividends or interest
• Calculate your final tax liability
This option is suitable for lower transaction volumes and clients comfortable managing software independently.
Package 2 – MTD Compliance Support
For clients who keep their own records but prefer professional oversight and submission.
We:
• Register you for Making Tax Digital (if required)
• Review quarterly figures
• Submit quarterly updates to HMRC
• Monitor deadlines
• Complete the Final Declaration
• Provide estimated tax guidance throughout the year
This is our most popular option and provides reassurance that submissions are accurate and on time.
Package 3 – Fully Managed MTD
For clients who prefer complete support throughout the year.
We:
• Register you for MTD
• Set up and connect compatible software
• Manage digital bookkeeping
• Reconcile bank transactions
• Submit quarterly updates
• Complete the Final Declaration
• Provide ongoing advice and support
This replaces the traditional once-a-year service with structured, ongoing compliance.
Important Information
If you have both:
• Self-employment income
and
• Rental property income
Separate quarterly updates are required for each income source.
Where applicable, this increases the number of submissions required each year.
Fees are based on:
• Transaction volume
• Number of income sources
• Software requirements
• VAT registration status (if applicable)
A tailored quotation will be provided following an initial discussion.
Not Sure Which Package Is Right For You?
If you are unsure whether you fall within Making Tax Digital, we can review your 2024/25 tax return figures and confirm your expected start date.
Contact us to arrange a consultation and discuss the most suitable level of support for your circumstances
TIP- HAVE A SEPARATE BANK ACCOUNT FOR BUSINESS AND RENTAL PROPERTY, THIS WIL SAVE YOU TIME AND ACCOUNTANCY FEES.
