CIS Deduction Calculator UK 2025 — How to Work Out What You're Owed

Making Tax Digital for Sole Traders in 2025 — Plain English, No Jargon

Making Tax Digital. You've probably heard the phrase. Maybe your accountant mentioned it, maybe you saw something on the HMRC website, maybe a mate on the tools brought it up. Either way, you've filed it under "something to deal with later" and got on with actual work.

That's fair. But "later" is getting closer, and the sole traders who sort this out early will have a much easier time than the ones who end up scrambling six months before the deadline.

What is Making Tax Digital actually?

Making Tax Digital (MTD) is HMRC's project to move the UK tax system onto digital records and online submissions. Instead of filling in one Self Assessment return a year from memory and a carrier bag of receipts, you keep digital records throughout the year and submit quarterly updates to HMRC.

MTD for VAT has been in place since 2019. MTD for Income Tax Self Assessment (MTD ITSA) is the next phase, affecting sole traders who handle their own tax through Self Assessment.

It's not about paying more tax. It's about how you record and report it.

Who does it affect and when?

From April 2026: sole traders with income over £50,000 per year From April 2027: those with income over £30,000 per year From April 2028: those with income over £20,000 per year (proposed) If your turnover is above £50,000, you have until April 2026 — which sounds distant but isn't once you factor in getting set up and finding software that works for how you operate.

What does quarterly reporting actually mean?

Under MTD ITSA, instead of one annual return, you'll submit four quarterly updates during the tax year — a summary of income and expenses for each quarter — plus a final declaration at year end.

The quarterly updates aren't full tax returns. They're summaries. The point is that your records need to be current enough at the end of each quarter to produce that summary.

The four quarters run April to July, July to October, October to January, and January to April — with submission deadlines a month after each quarter ends.

What counts as a digital record?

HMRC requires digital records of all business income received and all allowable business expenses. A spreadsheet technically counts, but HMRC-recognised software is strongly recommended — partly for ease of quarterly submissions, partly because a spreadsheet that gets lost doesn't give you much protection.

HMRC maintains a list of approved MTD-compatible software on their website.

Does this replace my accountant?

No. Your accountant can still handle your quarterly submissions if you authorise them. The practical change is that your records need to be current enough for quarterly submission rather than reconstructed each January.

This is the hidden benefit of MTD. Being forced to keep current records means you'll have a clearer picture of your finances throughout the year, your accountant will have less to do at year end, and there'll be fewer nasty surprises when your tax bill arrives.

What expenses can I still claim?

Nothing changes here. You can still claim tools and equipment, van running costs, fuel for work journeys, work clothing and PPE, phone and broadband (work proportion), public liability insurance, accountant fees, and training relevant to your trade.

The difference is you need to be recording these as you go — not reconstructing them from bank statements at the end of the year.

What if I do nothing?

HMRC will fine you. There's a points-based penalty system where you accumulate points for missed submissions before financial penalties kick in. And if you're above the threshold and not using MTD-compatible software by the deadline, you won't be able to submit at all — the old Self Assessment system won't be available to you for that purpose.

What you should do right now

Confirm your turnover — check your last Self Assessment return

Talk to your accountant — they should have an MTD plan for their clients already Look at your record-keeping — are your income and expenses currently recorded digitally? Choose software — check HMRC's approved list and find something that fits how you work Dayrates is MTD-ready — your invoices, expenses and records are digital from day one, which means when quarterly reporting kicks in, you're not starting from scratch.

The honest bottom line

MTD isn't as scary as it sounds. It's mostly about keeping records properly throughout the year instead of doing everything at the end. If you're already organised, it's barely a change. If you're not, it's an excuse to get there — which will save you money with your accountant and reduce the January stress every self-employed person knows too well.

Sort it on your terms, not HMRC's.