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How digital record-keeping, quarterly reporting, and smarter tools will shape the future for sole traders.
Major changes are on the horizon for the UK’s self-employed community.
From 2026 onwards, individuals earning through self-employment or property will gradually enter a new reporting system that relies on digital tools, more frequent submissions, and tighter record-keeping.
This guide explains what’s changing, who will be affected, and how to prepare well in advance, with practical insights into how platforms like Addition can ease the transition.
What’s Changing: A Clear Introduction to MTD for Income Tax
The government’s move to Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) marks a significant shift. Instead of relying on one annual Self Assessment, individuals will need to:
- Keep all business and property records digitally
- Submit quarterly updates through HMRC-compatible software
- File a final submission at year-end through approved tools
In practice, this means your bookkeeping will need to be consistent, accurate, and carried out in real time rather than rushed together once a year.
This is where Addition’s automated bookkeeping tools can make an immediate difference. The platform captures income and expenses automatically, stores records digitally, and ensures everything is organised long before HMRC expects your quarterly updates.
Instead of chasing paperwork, you simply work from a live, accurate view of your business finances.
Who Must Follow the New Rules - and When
The rollout is gradual, based on gross income from self-employment and/or UK property:
From 6 April 2026
Income over £50,000: You’ll be required to follow the new digital reporting rules.
From 6 April 2027
Income £30,001–£50,000: Self-employed people and landlords in this band join the system next.
From 6 April 2028
Income over £20,000: The final wave enters MTD the following year.
Anyone earning £20,000 or below remains outside the mandatory requirements for now.
If you’re unsure where you fall, Addition’s expert team can help you review your income streams, clarify whether your “qualifying income” meets HMRC’s thresholds, and advise on what your responsibilities will look like in the years ahead.
This support removes the guesswork so you can plan confidently.
What Compliance Really Looks Like Under the New Rules
Many people feel apprehensive about adopting new systems, but once you understand what MTD involves, the process becomes far less intimidating.
1. Digital record-keeping
You need to keep every business transaction in a digital format.
Addition’s platform automates most of this by pulling information directly from your bank feeds, generating organised categories, and storing everything in HMRC-ready form. It also means your quarterly numbers are always up to date.
2. Quarterly submissions
Every three months, you’ll submit a summary of income and expenses.
Because Addition keeps your books continually updated, preparing quarterly figures becomes less of a task and more of a quick confirmation.
3. A final end-of-year submission
This works much like the traditional Self Assessment - only fully digital.
If you choose, Addition’s compliance experts can manage the entire year-end process for you, ensuring deadlines are met and everything aligns with HMRC’s expectations.
4. Signing up for MTD
You must register before you start using the system.
Addition’s advisors can guide you through the sign-up, or handle it for you if you prefer.
What Stays the Same - and What to Watch Out For
Even with the new rules, some familiar elements remain:
- Payment deadlines still apply (31 January and 31 July for payments on account)
- Annual tax calculation still happens at year-end, not quarterly
- Lower-income traders remain outside the mandatory rules
- Your business structure doesn’t change - only your reporting method does
Where many self-employed people may struggle is in the increased frequency of reporting.
If bookkeeping is something you tend to do in a rush at tax time, quarterly updates could add pressure.
Again, this is where Addition’s automation helps: by keeping your books updated daily, you avoid the “pile-up effect” and stay compliant with far less effort.
Common Questions Self-Employed People Are Already Asking
Will this make my taxes more complicated?
Initially it may feel unfamiliar, but regular digital updates can actually simplify the year-end process. With Addition, much of the organisation runs quietly in the background.
Do I need software?
Yes - HMRC requires compatible software for submissions. Addition provides this capability while also managing the bookkeeping behind it.
Can my accountant handle the updates instead?
Yes, and Addition’s accounting team can take on as much or as little as you need, from quarterly updates to full year-end compliance.
What if my income fluctuates?
HMRC reviews your threshold each year. If your business grows unexpectedly, you may enter MTD sooner. With Addition’s reporting tools, tracking this becomes far simpler.
What about occasional or hobby income?
Small earnings under the trading allowance remain outside MTD. If your side-hustle grows, Addition can help you understand when reporting becomes necessary.
What You Should Do Now to Prepare for 2025 and Beyond
1. Estimate your income
Understanding whether you’re likely to cross an MTD threshold is essential. Automated bookkeeping and live dashboards make this much easier to monitor through the year.
2. Choose your digital bookkeeping system
If you haven’t already, select software that keeps your records clean, accurate, and ready for quarterly submissions. Addition offers an integrated solution that gives you both automation and access to a human team when needed.
3. Start digitising receipts and expenses
The earlier you build the habit, the smoother your transition will be.
4. Keep an eye on HMRC updates
Thresholds and guidance evolve. Addition’s compliance specialists stay on top of these changes so you don’t have to.
5. Consider signing up early
Some self-employed people choose to enter MTD voluntarily to get ahead of the curve.
A Practical Checklist for the Year Ahead
- Review last year’s turnover
- Confirm whether you may hit the new thresholds
- Explore digital bookkeeping tools
- Digitally store all receipts and business documents
- Track income in real time
- Prepare for the new quarterly rhythm
- Check in with a tax expert - especially if your income varies
- Make sure you’re aware of upcoming deadlines
Addition’s platform is particularly helpful here: it removes much of the manual burden while keeping your accounts accurate, compliant, and ready for the new reporting environment.
Final Thoughts
The move to Making Tax Digital marks one of the biggest reporting changes for UK sole traders in recent years. While the shift may feel daunting, the right tools and support can make the transition smooth and manageable.
Platforms like Addition are designed for exactly this moment, combining automated bookkeeping with real expert guidance so you know your records, submissions, and compliance obligations are handled correctly.
Whether you want full support or simply need a system that stays organised for you in the background, preparing early will put you in the strongest position for the years ahead.
Ready to Make the Transition Easier?
Book a call with Addition today to see how we can help automate your bookkeeping, manage compliance, and prepare you for the upcoming changes, or try our free pricing calculator to explore the best plan for your business.
