Get your sole-trader records ready for Making Tax Digital
Making Tax Digital for Income Tax is now live for qualifying sole traders and landlords. Merranti can help you understand when the rules apply, choose compatible software and keep the required digital records and quarterly updates under control.
MTD for Income Tax is being introduced in stages
The start date depends on your qualifying income from self-employment and property before expenses.
HMRC uses the turnover shown on your previous Self Assessment tax return to determine when you must begin. Employment income, dividends and income from a limited company are not included in the MTD qualifying-income calculation.
If your income fluctuates or you have more than one sole-trader or property business, Merranti can review the figures and explain which date applies.
When sole traders need to start
The statutory thresholds reduce over three tax years.
Qualifying income shown on the 2024 to 2025 Self Assessment tax return.
Qualifying income shown on the 2025 to 2026 Self Assessment tax return.
Qualifying income shown on the 2026 to 2027 Self Assessment tax return.
Your new reporting routine
MTD changes the record-keeping and reporting process, but quarterly updates are summaries rather than complete tax returns.
Keep digital records
Create and preserve digital records of your sole-trader income and allowable business expenses.
Use compatible software
Your software must connect to HMRC and support the MTD for Income Tax service.
Send quarterly updates
Every three months, send totals for the income and expense categories used by each business.
Correct records promptly
Update the digital records if an error is identified so the underlying information remains accurate.
Complete the tax year
Use the software to finalise business figures and include other taxable income, gains and relief claims.
Submit by 31 January
Your final tax return and any tax due remain subject to the normal 31 January deadline.
MTD applies across different types of sole-trader activity
The correct setup depends on the income sources, businesses and software already in use.
Contractors and self-employed professionals
We can review how invoices, expenses, CIS deductions and business records flow into the software, then make sure the quarterly reporting process is workable.
More than one income source
Where you have multiple sole-trader businesses or property income as well, the records and updates need to be organised for each relevant income source.
Make sure the foundations are in place first
Signing up is only one part of the process. The software, records and responsibilities need to be clear before reporting begins.
- Check the qualifying-income threshold and relevant start date.
- Confirm that you are registered for Self Assessment.
- Select compatible software that suits the business.
- Authorise the software to connect to HMRC.
- Agree who will maintain records and submit updates.
A practical route from assessment to ongoing compliance
We can support the whole process or focus on the parts your business needs.
Assess
Review your income sources, threshold and current bookkeeping process.
Set up
Select suitable software and configure the records and categories correctly.
Sign up
Complete the HMRC sign-up and authorise the chosen software or agent.
Maintain
Keep records current, submit updates and complete the annual tax return.
Digital reporting should support the business, not distract from it
A sole trader needs a system that is accurate but still simple enough to use consistently.
Merranti can help structure the bookkeeping so records are captured throughout the year rather than reconstructed at the deadline. That produces more reliable quarterly information and gives you a clearer view of cash flow and tax.
MTD for sole traders
Key questions about the new Income Tax reporting rules.
What counts as qualifying income?
Qualifying income is your gross turnover from self-employment and property before expenses. HMRC uses the income reported on the relevant previous Self Assessment tax return.
Do quarterly updates replace my annual tax return?
No. Quarterly updates provide summary income and expense totals. You still need to finalise the year and submit your tax return through compatible software by the normal deadline.
Do I need to make tax adjustments every quarter?
HMRC describes quarterly updates as summaries. Accounting and tax adjustments are not required before each update, although the underlying digital records should remain accurate.
Does employment or limited-company income count towards the threshold?
The MTD qualifying-income calculation is based on self-employment and property turnover. Employment income, partnership income and income from a limited company are dealt with separately.
Can Merranti sign me up and handle the updates?
Yes. Merranti can help assess whether the rules apply, set up the software, complete the agent authorisation and manage the ongoing bookkeeping and submissions.
Prepare your sole-trader business for MTD
Speak to Merranti about your threshold, software, digital records and quarterly reporting responsibilities.