Making Tax Digital is here: four things sole traders should do now

Since April 2026, Making Tax Digital (MTD) for Income Tax has required sole traders and landlords with qualifying income of over £50,000 to move their recordkeeping to a fully digital system.

Not every sole trader and landlord has successfully made this shift yet.

The latest figures show that 65% of eligible taxpayers have still not registered for MTD over a month after the deadline.

This means that almost a third of those affected by the regulatory change risk facing financial penalties in the long run if they do not successfully adopt digital record-keeping systems and the quarterly-filing rhythm.

The question, therefore, becomes: what do sole traders and landlords need to know now to smoothly transition to the new system?

Here, Richard Creedon, Product Compliance Manager, EMEA at Intuit, explains more.

1. Get digital systems in place early

The most immediate change under MTD is the requirement to maintain digital records of income and expenses. While this may feel overwhelming for sole traders and landlords who have relied on paper records, the sooner they get to grips with the technology, the sooner they can find tools and a workflow that suits their needs.

Start by choosing software that fits your business, then begin using it well before the first filing deadline. MTD-compliant software can make recordkeeping cleaner and less manual, from bank feed integrations to automated transaction categorisation and error-flagging tools.

Do not wait until the filing deadlines to learn a new system. Sole traders who build familiarity early will face less last-minute stress and be better prepared when deadlines arrive.

2. Build consistent processes

Alongside digital recordkeeping, another significant shift under MTD is the requirement to submit quarterly updates to HMRC, followed by an end-of-year declaration. Quarterly updates are not full tax returns, but they still rely on accurate, up-to-date financial information.

For years, many sole traders have managed tax administration retrospectively. Quarterly reporting changes that rhythm. Small gaps in bookkeeping can quickly build across multiple filing periods, creating added pressure later on.

That means recordkeeping now needs to become a routine, not a catch-up exercise. Set aside time each week to review income, log expenses and check that your records are complete.

Intuit data shows that 62% of sole traders already update their records at least weekly, demonstrating that for many, this won’t be as big a lift as expected. Those who make that habit consistent will be best placed to adapt and gain better visibility over their finances.

3. Use the ‘soft landing’ wisely

Sole traders also need to be aware that MTD for Income Tax introduces a new points-based penalty system for late submissions.

Each missed deadline incurs a penalty point, and a £200 fine is issued once the threshold is reached. For quarterly Income Tax submissions, that threshold is four points. See the current deadlines here.

At the same time, the current transition period gives sole traders room to adapt. The 2025 Autumn Budget confirmed that late submission penalties will not apply to quarterly updates during the 2026/27 tax year, giving sole traders time to test systems, establish routines and identify gaps before enforcement tightens.

The key advice here is to treat this limited window to practise without full penalty exposure, not a reason to wait. Use the flexibility to test your process, identify weak points and build habits that support long-term compliance.

These filings will still need to be made, so businesses that use this period well will be in a far stronger position next year.

Lean on accountants for ongoing support

As sole traders begin using MTD-compliant software, questions will inevitably arise. This is where their accountant can help, supporting them through the transition and establishing realistic best practices. Use that relationship proactively. Ask targeted questions about your business, your reporting process and any areas where you are unsure.

Digital records also give accountants greater visibility over your finances, allowing them to provide more granular, informed support throughout the year. Sole traders should take advantage of this, treating their accountant as a partner who can help with cash flow planning, tax forecasting and wider financial decision-making.

Set regular check-ins rather than saving every conversation for deadlines. That can turn the relationship from a functional one into a partnership that supports better decisions and long-term growth.

Becoming MTD-ready

Making Tax Digital needs to be understood as necessitating a change in behaviour. Those who treat it as a chance to build better routines will adapt faster, reduce the administrative burden and feel more in control of their finances.

By adopting digital systems, building consistent routines early, understanding the penalty system, and leaning on expert advice, sole traders will be able to manage MTD confidently and avoid the last-minute pressure that has long defined tax season.