Making Tax Digital for Sole Traders: What You Need to Know

July 6, 2026 • 6 min read

Making Tax Digital (MTD) for Income Tax is coming to UK sole traders. Here's what it means for you, when it starts, and how to prepare.

What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's initiative to digitise the UK tax system. It requires businesses to keep digital records and submit tax returns using compatible software, rather than manual paper returns or spreadsheets.

The goal is to reduce errors and make tax reporting more efficient for both taxpayers and HMRC.

When Does MTD for Income Tax Start?

The rollout for Income Tax Self Assessment (ITSA) is happening in phases:

From April 2026: Sole traders and landlords with income over £50,000
From April 2027: Sole traders and landlords with income over £30,000

If your income is below these thresholds, you're not required to join MTD immediately — but you can still volunteer to participate if you wish.

What You Need to Do

Under MTD for Income Tax, you'll need to:

Keep digital records: You must use compatible software to record your income and expenses
Submit quarterly updates: Send HMRC updates every three months (not just once a year)
File a final declaration: Submit your End of Period Statement (EOPS) by 31 January each year

Is Censitio MTD-Compatible?

Censitio helps you organise and categorise your bank transactions for HMRC. However, Censitio is not a MTD filing tool — it's a transaction categorisation tool.

To submit to HMRC under MTD, you'll need to use MTD-compatible bridging software (like VitalTax or Absolute Excel Filer) to connect your Excel summary to HMRC.

Tip: Read our MTD Bridging Guide to learn how to submit your Censitio Excel reports to HMRC.

How to Prepare for MTD as a Sole Trader

Start using digital tools now: Get comfortable with categorising transactions digitally (Censitio can help with this)
Keep your records up to date: Regular categorisation is easier than catching up at year-end
Choose your filing software: Research MTD-compatible bridging or accounting software
Understand your income: Check if you're above the £50,000 or £30,000 threshold