MTD software for sole traders: keep your spreadsheet

You must use Making Tax Digital for Income Tax if you are registered for Self Assessment, you have self-employment or property income, and your qualifying income is more than the threshold for that year. HMRC tests each year on the tax return you sent for an earlier year, as the table shows.

Qualifying income is your self-employment and property income before expenses, in other words your turnover, not your profit. Employment pay, dividends, pensions and your share of a partnership’s profit do not count towards it. If you also let property, your rent is added to your self-employment turnover.

HMRC writes to people it thinks are over the threshold, and from September 2026 it began signing people up itself. If no letter arrives, checking is still your job. Some people are exempt, including anyone with qualifying income of £20,000 or less, so check HMRC’s exemption rules if you think one applies.

Under the old Self Assessment year you could add up your figures once, after the year ended. Under MTD you keep digital records as you go and send HMRC a summary four times a year. HMRC calls these summaries quarterly updates. They are not tax returns, and you do not need to make accounting or tax adjustments before sending one.

Each digital record needs the amount, the date and a category. The categories are the same as Self Assessment, the ones you know from the SA103 self-employment pages. HMRC never receives your receipts or invoices, only the totals. You still keep the original documents yourself.

• Keep digital records of your income and expenses in software, or in a spreadsheet linked to bridging software.
• Send a quarterly update for each self-employment business, covering the tax year so far.
• Make any year-end adjustments, then submit your tax return through your software by 31 January.
• Pay your tax on the same dates as before. MTD does not change when you pay.

The standard update periods follow the tax year and all start on 6 April. Each update covers the tax year so far, so the second update covers 6 April to 5 October, not just July to October. If you have nothing to report for a period, you still send a nil update.

If your accounts run from 1 April to 31 March, you can choose calendar update periods instead. The deadlines are the same. You must make that choice before you send your first update of the year, because you cannot change it afterwards.

If you joined on 6 April 2026, HMRC’s dates for your first year are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. Your first MTD tax return is due by 31 January 2028. Your 2025 to 2026 return is still a normal Self Assessment return, due by 31 January 2027.

SimpleTaxFlow is MTD bridging software, so you can keep the spreadsheet you already use. Open your quarterly update, download the template, fill in your totals for the tax year so far, save it as CSV and upload it. A self-employment CSV in GoFile’s layout works too. If you spot a mistake, fix the spreadsheet and upload it again. The new upload replaces your last one for that business and tax year.

If you would rather not keep a spreadsheet, record your income and expenses in Bookkeeping, one at a time or several together. Your quarterly update adds them up for you. Keeping records in Bookkeeping is free.

You can also mix the two. Upload your spreadsheet up to a date you choose, then carry on in Bookkeeping from the following day.

HMRC lets smaller businesses use what it calls simpler categorisation. If a self-employment business has turnover under £90,000, you only need to record whether each transaction is income or an expense. The update then sends total income and total expenses for that business.

The test is for each income source on its own. If turnover reaches £90,000, you must split all of that business’s records into HMRC’s categories before your next update, for the current tax year and the following one. If you are not sure whether you will reach £90,000, HMRC says to use the categories from the start.

In SimpleTaxFlow you answer one question for each business and tax year: “Do you expect this business’s turnover to be £90,000 or more this tax year?” Choose No, use Simple for one expenses total, or Yes, use Detailed for HMRC’s expense categories. If your recorded turnover reaches £90,000, Detailed applies for that tax year and the next.

Here is how the figures build up through the year for a fictional self-employed plumber who expects turnover of about £60,000. That is under £90,000, so the plumber answers the turnover question with No and uses Simple.

The first update covers 6 April to 5 July. The second covers 6 April to 5 October, so it repeats the first three months and adds the next three.

Once the fourth update is sent, you make any year-end adjustments in your software. That can mean claiming the trading allowance, removing costs you cannot claim, or adding capital allowances. You change the year’s category totals, not each transaction.

Before you submit, you add any other income HMRC needs, such as savings interest or dividends. After each update you can also see HMRC’s own tax calculation. Any estimate of ours is shown separately and labelled as an estimate.

You submit the tax return by 31 January after the tax year ends, and you can change it within 12 months of that deadline. You cannot claim a refund inside an MTD tax return. HMRC asks you to do that through your HMRC online account.

In SimpleTaxFlow you can add employment, savings, dividends and CIS deductions to the same tax return.

Most problems come from treating MTD like the old once-a-year return. These are the ones to watch for.

In SimpleTaxFlow, every update shows the dates it covers, from 6 April or, with calendar update periods, 1 April, so you can check before you send.

• Sending only the latest three months. Each update covers the tax year from its start, 6 April or 1 April for calendar update periods.
• Testing qualifying income on profit. HMRC uses turnover before expenses.
• Treating an update as a payment. Tax is still paid on the usual Self Assessment dates.
• Retyping figures from a spreadsheet into other software instead of using a digital link.
• Skipping an update because nothing happened. Nil updates are still required.
• Choosing Simple when you are unsure about £90,000. HMRC says to use the full categories if unsure.

Keeping your records is free. You can download the template, record income and expenses in Bookkeeping and correct them as often as you need without paying anything.

You pay for a yearly plan only when you are ready to send to HMRC. It covers your quarterly updates, year-end adjustments and your tax return. The current price is shown on this page.