Making Tax Digital for Sole Traders: Plain English

Making Tax Digital for Income Tax is an HMRC system that requires affected sole traders and landlords to keep digital income and expense records, send quarterly updates and submit their tax return through compatible software. It begins in stages, so check the current income threshold and start date that apply to you.

This guide is general information, not tax advice. Rules, thresholds and dates change. Check the official sources below for your situation.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax asks affected taxpayers to keep their business records digitally and send updates to HMRC using compatible software.

The aim is fewer errors and fewer last-minute surprises. Instead of gathering everything once a year, you keep records as you go.

Who does Making Tax Digital apply to?

MTD is being introduced in stages. Whether it applies to you, and from when, depends on things such as your type of income and how much you earn.

We are not going to quote thresholds or start dates here. They are set by the government and can change. The right place to check is gov.uk. Searching "Making Tax Digital for Income Tax" will take you to the official guidance.

If you are unsure, an accountant or HMRC can tell you where you stand.

What does Making Tax Digital ask you to do?

Stripped back, MTD comes down to three habits.

Keep digital records

You record your income and expenses in software rather than only on paper. You do not have to throw away paper receipts. Many people keep a photo or scan alongside the record.

Use compatible software

The software you use needs to work with HMRC's systems. Spreadsheets can sometimes be used with extra tools. A simple spreadsheet on its own generally cannot do the job.

Send updates to HMRC

Under MTD, you send periodic updates and a final end-of-year declaration through your software. The exact schedule is set by HMRC. Check gov.uk for how it applies to you.

What does not change

Some things stay the same.

You still owe tax on your profit.
You still need receipts and invoices.
You still need to be able to explain your figures.

MTD changes how records are kept and sent. It does not change the need for proof behind them.

Why evidence still matters

Digital does not mean casual. A number typed into software is still only a number.

If HMRC or your accountant asks about an expense, the receipt and a short note are what answer the question. Good records link the figure to its proof, so you are not searching through email and carrier bags later.

This is the idea we call evidence-first. Keep the proof, not just the total.

How to prepare without panic

You do not need to do everything today. A few small steps help.

Check gov.uk to see whether and when MTD applies to you.
Start recording income and costs in one place, even now.
Keep a receipt with every expense.
Separate business spending from personal spending.
Talk to an accountant if your situation is not straightforward.

Where BookPilot is today

We want to be clear about this, because it matters.

BookPilot is designed with Making Tax Digital in mind. It is built to keep receipts, notes and records together so that you have proper evidence behind every figure.

However, live submissions to HMRC are disabled. BookPilot cannot send anything to HMRC today. Please do not rely on it to meet an MTD filing obligation yet.

What BookPilot does today:

Helps you record invoices and expenses step by step.
Keeps receipts and notes attached to each record.
Gives you and your accountant a clear, reviewable set of records.
Offers an AI assistant that prepares drafts and suggestions. It never acts without your approval.

BookPilot is an early-access release for Windows. There is no Android version yet. We will update this page as things change.

Common worries, answered simply

I am not good with numbers. You do not need to be. You need to record what happened and keep the proof. Good software guides the rest.

I only earn a small amount from self-employment. Check gov.uk. Whether MTD applies depends on current thresholds, which we will not guess at here.

I use an accountant. Ask them how MTD affects you and which software they accept. Many accountants prefer clients who keep tidy, evidence-backed records, whatever tool is used.

I am worried I will get it wrong. Starting early with a steady habit is the best protection. Small, regular records beat a big rush.

Questions to ask any MTD software

Whichever tool you choose, ask:

Is it recognised by HMRC for the type of submission I need?
Can I see the receipt behind every figure?
Can my accountant access my records?
What happens to my data if I leave?
What does it not do yet?

A trustworthy provider will answer the last one plainly.

Related guides

Official sources

A gentle next step

If you want a calm place to build good records now, while the rules settle around you, have a look at BookPilot. It is early access, and we say clearly what it can and cannot do. You can find founding access on the BookPilot website.

General information only, not tax advice. Rules and dates change, so check GOV.UK for the current position. Read how BookPilot's guides are prepared and reviewed.

Making Tax Digital for sole traders, in plain English