MTD for ITSA: What Sole Traders Need to Know (Without the Jargon)

If you're a sole trader, you've probably heard the term "MTD for ITSA" floating around — maybe in the news, maybe from your accountant, or perhaps not at all. Either way, it's a big change coming to the UK tax system, and it's something you need to be ready for.

The good news? It doesn't have to be confusing or stressful. Here's a plain-English breakdown of what it means, how it affects you, and what you can do about it.

What is MTD for ITSA?

Let's break down the jargon:

MTD stands for Making Tax Digital — the government's push to modernise the tax system by moving it online.

ITSA means Income Tax Self Assessment — that's the system sole traders and landlords use to report their income and pay tax.

Put together, MTD for ITSA means you'll need to keep digital records and send tax updates to HMRC using approved software — not just once a year, but quarterly.

Why is This Happening?

The aim is to make tax reporting more accurate, more timely, and (believe it or not) easier in the long run. The government hopes it will:

✅ Reduce errors and missed deadlines
✅ Make it simpler to keep on top of your tax affairs
✅ Encourage better record-keeping

But — and it's a big but — it does mean extra admin for sole traders who aren't prepared.

How Does MTD for ITSA Affect Sole Traders?

Here’s the simple version:

• If you're a sole trader with business income over £50,000, MTD for ITSA applies to you from April 2026.

• If your business income is between £30,000 and £50,000, it kicks in from April 2027.

• If your business income is between £20,000 and £30,000, it kicks in from April 2028.

• HMRC hasn't set a date yet for those earning below £20,000.

When it's your turn, you’ll need to:

✔ Keep digital records of your income and expenses
✔ Use HMRC-approved software to submit quarterly updates
✔ Send an end-of-year final declaration (similar to your current tax return)

Gone are the days of keeping receipts in a shoebox and scrambling to fill out your Self Assessment in January.

Common Questions from Sole Traders

Do I need to register for MTD?
Not yet — HMRC will let you know when it's your time based on your income. But it's smart to prepare early.

Can I still use spreadsheets?
Only if they connect to MTD-compatible software. Manual spreadsheets on their own won’t cut it.

What if I already use accounting software?
If it's MTD-approved (like QuickBooks, Xero, Sage, etc.), you're ahead of the game. If not, it's time to look at your options.

Why It Pays to Get Prepared Early

Waiting until the last minute could mean:

⏳ A rushed, stressful transition
💸 Costly mistakes or missed deadlines
😵 Confusion over choosing the right software

Getting ahead means:

✔ Time to explore your software options
✔ Smooth setup and support from an accountant
✔ Confidence that you’ll be ready when the rules apply to you

How Carr Accounting Studio Can Help

We know tax rules can feel overwhelming — that's exactly why we exist.

At Carr Accounting Studio, we work with sole traders just like you to:

✅ Choose simple, MTD-compliant software that suits your business
✅ Get your records set up properly — without the jargon
✅ Handle your tax submissions so you can focus on what you do best

Whether you're already using software, still working with spreadsheets, or don't know where to start — we're here to make it easy.

Want Straightforward, Expert Help?

We love sorting this stuff so you don’t have to. If you’d like clear advice, stress-free setup, or just a friendly chat about MTD for ITSA, get in touch.

Let’s have a no-pressure chat — your future self will thank you.

Book a Call