What Sole Traders Need to Know About Making Tax Digital Income Tax Changes
If you’re anything like me, you’ve seen the HMRC emails about Making Tax Digital… and quietly thought, “Eughhh! I’ll look at that later.”
They’re long. They’re boring, and they’re not exactly written with us freelancers in mind.
But this one isn’t going away – not yet anyway.
I’ve been digging into what it actually means for those of us who are self-employed – interior stylists, photographers, designers, writers, creatives, freelancers – and I want to share what I’ve understood so far.
Important note before we go any further: I’m not an accountant (obvs!). This is my perspective as a solo/freelance business owner. For personalised advice, please speak to an accountant (and yes, that’s exactly why I’m running a workshop with one next week).
And I’m going to say something else here.
An Interior Stylist told me recently that her accountant wanted to charge her £150 just to explain what Making Tax Digital is.
Now, I absolutely believe in paying professionals properly. We should. But basic clarity about a government change that affects every self-employed person shouldn’t feel like an add-on.
That is exactly why I want us to understand this stuff. So no one feels intimidated, confused, or charged to ask questions – that might feel simple.
Information shouldn’t be gatekept.
What Is Making Tax Digital (In Plain English)?
Making Tax Digital (MTD) for Income Tax is the government’s plan to move self-employed people away from one big annual tax return and into digital record-keeping with quarterly updates.
Instead of one tax return in January
It becomes:
- Digital record keeping
- Quarterly summary submissions
- One final declaration at the end of the tax year
Tax payment dates in January and July stay the same.
The big shift is how and how often we report.
Who Does This Affect – And When?
From 6 April 2026, you must join MTD if:
- You’re a sole trader
- You submit a Self Assessment tax return
- Your gross income (before expenses) from self-employment and/or UK property is over £50,000 in the 2024/25 tax year
If you earn:
- Over £30,000 you’re expected to join from April 2027
- Over £20,000 you’re expected to join from April 2028
Employment income through PAYE doesn’t count towards this threshold.
If You Earn Under £50,000 – What Should You Be Doing?
Even if you’re currently earning between £20,000 and £50,000, this is still relevant.
You don’t have to submit quarterly yet. But this is the moment to build good habits.
Here’s what “getting organised digitally” actually means:
- Open a separate business bank account (not legally required, but honestly, it makes life so much easier)
- Use digital accounting software like Freeagent, Xero etc
- Record income and expenses as they happen
- Photograph or scan paper receipts
- Stop relying on the shoebox method
It’s about building a system now so it doesn’t feel overwhelming later.
If You Earn Over £50,000 – This Is For You
If your gross income is over £50k, this becomes mandatory from April 2026.
It’s important to note that this is your combined gross income from self-employment and property if you have both.
For example, if you earn £35,000 from self-employment and £20,000 from rental income, that takes you to £55,000 in total – which means you would fall over the £50,000 threshold and need to join MTD from April 2026.
And this is where the real questions start.
The Questions People Over £50k Are Quietly Asking
- Do I have to sign up myself or will HMRC move me automatically?
- What if my income fluctuates?
- What if I have more than one business?
- What if I freelance and have rental income?
- Do I need separate software for each income stream?
- Will my accountant handle this?
- What happens if I miss a quarterly deadline?
- Will I be able to see roughly how much tax I’m likely to owe as the year goes on?
- Do payments on account still apply?
- Does this mean more inspections?
- How accurate do quarterly submissions need to be?
- What penalties are involved?
These are the real concerns.
What Actually Changes If You’re Over £50k
1. Digital Record Keeping Becomes Mandatory
You must:
- Keep records digitally
- Use MTD-compatible software
- Submit through that software
Spreadsheets alone won’t be enough unless connected to bridging software.
(Bridging software is a tool that links your spreadsheet to HMRC’s system so the data can be submitted digitally. So you can still use Excel, for example, but it has to be connected properly rather than emailed or uploaded manually.)
This is infrastructure now, not optional admin.
2. You’ll Submit Quarterly Updates
Your quarters will typically look like this:
- 6 April – 5 July (due 7 August)
- 6 July – 5 October (due 7 November)
- 6 October – 5 January (due 7 February)
- 6 January – 5 April (due 7 May)
These are summaries of income and expenses.
You are not paying tax quarterly.
You are not submitting a full tax return four times a year.
You are updating HMRC with your numbers.
3. You Still Submit a Final Declaration
At year end, you’ll:
- Finalise figures
- Make adjustments
- Submit a final declaration
The 31 January deadline remains.
4. You Still Pay Tax in January and July
This doesn’t change.
MTD changes reporting frequency.
It does not change payment timing.
What Being Properly Organised Actually Looks Like
Whether you’re under or over £50k, this is the system I’d suggest. Think of it less like “doing your accounts” and more like maintaining your business. Because what MTD really rewards is consistency.
Here’s what that looks like in real life.
Weekly (30 minutes)
This is your mini check-in.
- Log all income that comes in
- Log all expenses while they’re still fresh in your mind
- Upload or confirm receipts (snap the photo immediately rather than creating a pile)
- Check your bank feed has pulled everything through correctly
- Move anything personal that accidentally went through your business account
If you do this weekly, nothing builds up. Nothing becomes too scary.
Monthly
This is your tidy-up layer.
- Reconcile your bank account properly (make sure your software matches your bank balance)
- Check categories are accurate (materials, travel, stationery, software, etc.)
- Flag anything unusual or large so you remember what it was
- Check how much profit you’re roughly sitting on
- Transfer money into a separate “tax pot” if you do that (highly recommend)
This is where you start seeing your numbers clearly rather than guessing.
Quarterly
This becomes very quick and easy if you’ve done the weekly and monthly work.
- Review totals before submission
- Check no receipts are missing
- Look at your profit for the quarter
- Sense-check the figures before pressing submit
- Submit before the deadline (not the night before at 10:58pm)
Quarterly updates should feel like a summary, not a scramble.
Annually
This is still your strategic moment.
- Work with your accountant to finalise everything
- Make any adjustments needed
- Review profit trends across the year
- Look at cash flow patterns
- Decide what needs to change next year
MTD doesn’t remove the need for proper year-end thinking. It just means you’re not starting from scratch – I know you’ve been there. We all have!
“What Am I Missing?”
If you’re reading this thinking,
“It sounds straightforward… but what am I not seeing? What don’t I know?”
You’re not alone.
Most freelancers worry there’s a hidden catch.
From what I can see, the biggest shift is:
- Organisation
- Systems
- Consistency
And possibly mindset.
It’s moving from reactive to structured.
Why I’m Running a Workshop
I don’t want us relying on half-understood HMRC emails.
And I don’t want interior stylists or creatives panicking because they feel behind.
So I’m bringing in an accountant – John Falcon from JF Financial, who specialises in small businesses and freelancers.
In the workshop, we’ll cover:
- What software actually makes sense
- How quarterly submissions work in practice
- What counts as qualifying income
- How to manage multiple income streams
- What happens if you make mistakes
- How to plan cash flow properly
- And your specific questions
- And, if we have time, John will also answer questions about end-of-year planning so you can think ahead rather than just react
Because your business isn’t generic. And your tax questions won’t be either.
This blog is my perspective as a freelancer running a business. For tailored advice, always speak to an accountant. But if you want clarity, calmness, and the chance to ask your own questions in plain English – come to the workshop.
Let’s get ahead of it rather than scrambling later.
Join The Workshop
I’ll be joined by Accountant John Falcon from JF Financial, who specialises in small businesses and freelancers.
Date: Thursday 5th March
Time: 2pm (UK time)
This is your chance to:
- Ask your specific questions
- Understand exactly how MTD applies to your business
- Get clarity on software
- Understand quarterly submissions properly
- Stop feeling like you’re missing something
The workshop will be live on Zoom.
• Inside Stylists members attend free
• Non-members can purchase a ticket for Zoom access (£37)
The session will run for one hour, and a replay will be available for 7 days if you can’t attend live.
No gatekeeping. No £150 explanation fee. Just clear information.
You can sign up here:
If this affects you (or will affect you soon), I’d strongly recommend booking your place.
Especially if you’re over £50k or close to it. This isn’t something to leave until April 2026 and hope it makes sense by then.
Even if you just come along to feel calmer and clearer, that’s worth it.
Book your place, bring your questions, and let’s make this feel manageable rather than intimidating.
