Why sole traders earning over £50,000 need digital record systems in place ahead of April deadlines

If your qualifying income from self-employment and property was over £50,000 in 2024/25, you are already inside Making Tax Digital for Income Tax. It started on 6 April 2026, and HMRC has been signing up non-joiners since September where its records show they should be in the system. If your qualifying income is over £30,000 for 2025/26, April 2027 is your start date. If it is over £20,000 for 2026/27, April 2028 follows.

Making Tax Digital for sole traders is really a record-keeping rule wearing a filing rule’s clothing. The filing part can be quick. The groundwork is the bit that takes time, because the records you keep from day one of the tax year have to be digital.

Who is in, and when

Qualifying income is gross turnover and property income before expenses, added together across your sole trade and property income. A plumber turning over £56,000 with £19,000 of costs is in scope on the £56,000 figure, not the profit. Employment income, pensions and investment income are not part of that threshold calculation, although they still need to be dealt with when you finalise your tax position.

What counts as a digital record?

This is where the misunderstandings cluster. A digital record is not simply a scan of a receipt or a note in your phone. For each income or expense record, you need the date, amount and category, held in compatible software or a spreadsheet system with the right digital link to whatever you submit to HMRC.

Typing numbers from a spreadsheet into a submission by hand breaks that chain. If you want to keep using a spreadsheet, you need bridging software connecting it to HMRC. Most people find that proper accounting software is simpler, and HMRC publishes a list of compatible products.

Three practical habits make the quarterly updates straightforward:

1. Connect your business bank account to the software so transactions arrive automatically.
2. Categorise weekly rather than quarterly, while you still remember what a payment was for.
3. Keep business and personal spending on separate accounts, which saves hours of sorting later.

A joiner we work with resisted all of this for two years. He now spends about 20 minutes a week on it and his first two quarterly updates took under 10 minutes each. His previous January, by contrast, involved a carrier bag and a lot of swearing.

Moving to Xero or similar also gives you something you did not have before: a reasonably accurate view of profit during the year rather than 10 months after it. If you are also VAT registered, you are already filing digitally, and it is worth checking your HMRC VAT account is clean while you are at it.

The deadlines that follow

For the standard tax year quarters, quarterly updates are due on 7 August, 7 November, 7 February and 7 May. Your first Making Tax Digital tax return for 2026/27 is due by 31 January 2028. That return is where you add other income, claims, reliefs and final adjustments before confirming the tax due.

HMRC has confirmed there are no penalty points for missing quarterly update deadlines during the 2026/27 tax year, which is a genuine concession rather than a trap. You still need to keep digital records and send the updates before you can submit your tax return.

Late payment is a different matter. Interest runs from day one on tax paid late. Under the new penalty rules, the first year gives a 30-day window to pay or contact HMRC about a payment plan. After that first year, the normal timetable is tighter: no penalty up to 15 days late, then a percentage charge at day 15, another at day 30, and a daily annualised charge from day 31 if the tax remains unpaid.

If you have property income too

Sole traders with rental income on the side need the streams reported separately, which is another reason loose records cause trouble. Our note on how agent access works under MTD explains how your accountant fits into the process.

Jointly owned property has its own rules, and anyone who sits on a residents’ board should keep that company’s books entirely separate, as set out in our guide to RTM annual accounts and our service charge accounting guide. If you are weighing up incorporation, the reporting burden changes rather than disappears, and our profit and loss filing checklist shows what company filing now involves. Contractors and agents handling building works should also look at our guidance on commercial property management accounting, since costs recharged through a year-end service charge statement need to reconcile with your own records.

Get your records sorted before your start date

Whether you are already filing quarterly or have an April 2027 start date, the time to set up the system is before the tax year begins rather than during it. FHP Accounting provides bookkeeping, personal tax returns, VAT returns and support for landlords, and can run the whole thing for you through our outsourced finance department. Speak to us and we will set your records up properly the first time.

Kellee Quigley

I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.