Making Tax Digital (MTD) represents a significant shift in the way HMRC collects and processes tax information. Launched to streamline tax administration and reduce errors, MTD requires many businesses and individuals to maintain digital records and submit returns using compatible software. For sole traders, the transition can seem daunting. However, with the right approach, you can embrace MTD and make your tax affairs more efficient and stress-free. Read on to find out how.
Understanding Making Tax Digital
Making Tax Digital aims to move UK taxation into the modern era by requiring digital record-keeping and quarterly updates to HMRC. From April 2026, most sole traders with annual turnover above the VAT threshold (£90,000) must comply. Even if you fall below this threshold, voluntary participation offers benefits such as better cash flow management and real-time insight into your finances. Recognising deadlines and obligations is the first step towards seamless compliance.
Keep accurate records
Accurate record-keeping is the cornerstone of MTD. Rather than shoe-boxing receipts or maintaining paper ledgers, use digital tools to capture every sale, expense and mileage entry as it happens. Scan invoices with your smartphone, log purchases on the same day and reconcile bank statements monthly. Consistency reduces the risk of missing data and makes quarterly submissions far less stressful.
Choose the right software
MTD-compatible accounting software is non-negotiable. Many packages cater specifically to sole traders, offering user-friendly interfaces, mobile apps and automated bank feeds. When evaluating software, consider factors such as:
Integration with your existing systems
Ease of submitting updates directly to HMRC
Support and training resources
A trial period can help you assess whether a particular cloud-based solution meets your needs without long-term commitment.
Stay on top of deadlines
Under MTD, you’ll make quarterly “digital updates” rather than submitting a single annual self-assessment tax return. Typically, these deadlines fall one month and seven days after each quarter ends (for example, for the quarter up to 30th June, the deadline is 7th August). Missing deadlines can incur penalties, so set reminders in your calendar or ask TreyBridge to help you stay on track.
Avoid common pitfalls
Several common errors catch sole traders out when adapting to MTD:
Mixing personal and business transactions in one account
Delaying entries until year-end
Failing to back up digital records
Overlooking capital allowances or reliefs
Address these issues early by separating your finances, updating records promptly and reviewing your accounts with TreyBridge on a quarterly basis.
Seek professional support
Navigating MTD for the first time can raise many questions. TreyBridge Accountants specialises in guiding sole traders through every stage of Making Tax Digital. Whether you need initial setup, software training or quarterly health checks, our experts are here to ensure you comply without sacrificing valuable time.
Contact TreyBridge for MTD support
Get in touch with TreyBridge Accountants today on 01482 235575 or fill in our contact form for tailored, proactive support that keeps your business fully compliant.
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