If you're self-employed with gross income over £50,000, Making Tax Digital for Income Tax is mandatory from 6 April 2026. Here's everything you need to know.
Compare Software →If you're self-employed — whether you're a freelancer, contractor, tradesperson, or run any kind of sole trader business — Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is coming for you. From 6 April 2026, the way you report your income to HMRC will change permanently.
Instead of one annual Self Assessment return, you'll submit quarterly updates throughout the year, plus a final end-of-year declaration. This guide explains exactly what that means, who it applies to, and how to get ready without the stress.
MTD for ITSA is being rolled out in waves based on your gross qualifying income:
If you're not sure which wave catches you, the key question is: what was your gross self-employment income in the last tax year? That's the number HMRC will use to determine when you must comply.
Not all income counts. Qualifying income is income from self-employment (sole trader businesses) and income from property letting. It does not include:
So if you earn £40,000 as an employee and £15,000 as a freelancer on the side, only the £15,000 counts as qualifying income — you wouldn't be caught by Wave 2 at that level. But if your freelance income grows above £20,000, you'll be in scope for Wave 3 from April 2028.
HMRC uses your gross income to determine whether you're in scope — not your profit. That means your turnover before expenses, not what's left after you've paid for materials, software, travel, or anything else.
A self-employed builder invoicing £55,000 a year but spending £20,000 on materials is still in Wave 1 from April 2026, even though their net profit is only £35,000. Don't make the mistake of checking your profit figure instead of your turnover.
Under MTD for ITSA, you'll submit four quarterly updates to HMRC each year, plus a final declaration. The quarters align to the standard tax year (6 April to 5 April), with submissions due:
The quarterly updates are not tax returns. You're simply sending HMRC a summary of your income and expenses for that period. The final declaration at the end of the year is where you confirm everything, add any other income sources, and lock in your tax position.
For each quarter, you'll submit a summary of your business income and allowable expenses — categorised in the same way as a standard Self Assessment return. Your MTD software handles the formatting and submission automatically.
You don't need to attach invoices or receipts to each quarterly update. But you do need to keep digital records that back up your figures, because HMRC can ask to see them. This is a key part of the new rules — the record-keeping requirement is just as important as the submission deadlines.
To submit under MTD for ITSA, you must use HMRC-recognised software. You cannot submit directly through HMRC's own portal. There are two main approaches:
This is accounting or bookkeeping software that handles everything in one place — recording your income and expenses, generating quarterly summaries, and submitting directly to HMRC. Examples include QuickBooks, Xero, FreeAgent, and FreshBooks.
This is the right choice for most sole traders. You connect your bank account, categorise transactions, and the software does the rest. It reduces the chance of errors and makes the quarterly deadline feel much less daunting.
Bridging software sits between your existing spreadsheets or records and HMRC. You continue keeping records however you like (a spreadsheet, a folder of receipts, a cashbook), and the bridging tool reads your data and submits it in the correct MTD format.
This works well if you already have a system that suits you and don't want to rebuild it. GoSimpleTax and a handful of other tools offer this route. It tends to be cheaper, but requires more manual effort — you're still responsible for organising your records; the software just handles the submission step.
FreeAgent is purpose-built for this. It handles invoicing, expense tracking, bank feeds, and MTD submissions in one clean interface. It's also free if you have a NatWest, Royal Bank of Scotland, or Mettle business account.
QuickBooks Self-Employed or QuickBooks Simple Start work well for high-volume businesses. The mobile app makes it easy to photograph receipts and categorise expenses on the go, which is practical if you're not sitting at a desk all day.
GoSimpleTax is one of the most affordable HMRC-recognised options and takes a bridging approach, so you can keep your current system and just use it for submissions. Good for sole traders with straightforward finances who don't need full accounting software.
Xero is the most powerful option and scales well as your business grows. It integrates with hundreds of third-party apps and is popular with accountants, so if you work with a bookkeeper, they'll likely already know it.
MTD for ITSA is designed to be manageable without an accountant — that's partly the point. If your finances are straightforward (one income stream, standard expenses), good software is probably all you need.
If you have multiple income streams, rental property, complex expenses, or you're simply not confident with numbers, working with an accountant alongside MTD software gives you the best of both worlds. Many accountants now offer MTD-specific services at reasonable fixed fees.
The biggest mistake sole traders make is treating compliance as a last-minute task. The quarterly deadlines mean there's no grace period to figure it out — if you're in Wave 1, your first submission covers April to July 2026 and is due in August 2026. That's not far away.
Start by choosing your software now, connecting your bank account, and getting comfortable with how it works before the first deadline arrives. The earlier you start, the less painful it is.
Not sure which software is right for you? Our MTD software comparison breaks down the top HMRC-recognised options side by side — features, pricing, and which type of sole trader each one suits best. Find your best match and get set up before the rush.
Compare HMRC-approved MTD software options and find the right fit for your situation.
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