Making Tax Digital for Income Tax Self Assessment (MTD ITSA) is coming — and if you're a self-employed cleaner, gardener, dog walker, or tradesperson in the UK earning above certain thresholds, it will change how you report your income to HMRC. Here's what you actually need to know, in plain English.
What Is Making Tax Digital?
Making Tax Digital is HMRC's plan to move self-assessment tax returns from the once-a-year paper (or online) filing system to a quarterly digital submission. Instead of filling out one tax return in January, you'll submit income and expense summaries every three months through compatible software, plus a year-end declaration.
The idea is to reduce errors, close the tax gap, and give you a more up-to-date picture of your tax position throughout the year. Whether that last part actually helps you as a sole trader is debatable — but the requirement itself is not optional.
When Does It Start?
MTD ITSA is being rolled out in phases based on your gross income (turnover, not profit):
- April 2026 — if your gross income is over £50,000
- April 2027 — if your gross income is over £30,000
- April 2028 — if your gross income is over £20,000
Those dates are based on your income in the previous tax year. So if you earned £32,000 in the 2025/26 tax year, you'll be caught by the April 2027 wave.
Important: the threshold is gross income — everything you billed before expenses. A gardener who invoices £35,000 but spends £8,000 on fuel, tools, and insurance is still above the £30,000 threshold even though their profit is £27,000.
What Exactly Do You Have to Do?
Under MTD ITSA, you'll need to:
- Keep digital records— your income and expenses must be recorded in compatible software throughout the year. Spreadsheets and Word documents won't count unless they feed into an approved tool.
- Submit quarterly updates— four times a year, you submit a summary of your income and expenses to HMRC through your software. These aren't tax returns — they're more like progress reports. The quarters follow the tax year: Q1 is 6 April – 5 July, Q2 is 6 July – 5 October, and so on.
- File a year-end declaration — after the tax year ends (5 April), you confirm your final figures and submit your declaration. This replaces the traditional self-assessment return.
What Counts as "Compatible Software"?
HMRC maintains a list called Software Choices— tools that can connect to HMRC's API and submit your quarterly updates digitally. The key word is "submit" — the software needs to actually send data to HMRC on your behalf, not just produce a report you then type into a government website.
Big names like QuickBooks, Xero, and FreeAgent are already listed. But many of those tools are designed for businesses with employees, complex VAT, and multi-entity accounting. If you're a sole trader with 10–15 regular clients, you don't need (or want) that complexity.
What Does This Mean for Sole Traders Specifically?
If you're a cleaner in Birmingham with 12 regular clients and you invoice £2,800 a month, your gross annual income is £33,600. That puts you in the April 2027 group. Here's what changes for you:
- You can't keep using a Word template or a notebook to track what you've invoiced. Your records need to be in digital software.
- Every quarter, your software needs to send HMRC a summary of your income and expenses. You don't need to calculate your own tax — the software handles the submission format.
- You still need to file a final declaration after 5 April, but the heavy lifting is done by the quarterly updates. Your accountant (if you have one) can still help with the year-end.
The good news is that if you're already using invoicing software that timestamps and stores your invoices digitally, you're halfway there. The records exist — you just need a tool that can submit them.
Penalties for Getting It Wrong
HMRC is introducing a new points-based penalty system. Each late quarterly submission adds a point. Once you reach the threshold (4 points for quarterly obligations), you get a £200 penalty — and every subsequent late submission is another £200 until you clear the slate by filing on time for a full year.
Late payment penalties are separate: 2% of unpaid tax at day 15, another 2% at day 30, and 4% annualised after that. Interest runs from the due date.
The first year will likely have some leeway as HMRC beds in the system, but don't count on it. The penalties are automated.
What About Ireland?
Ireland doesn't have MTD — yet. The EU's VAT in the Digital Age (ViDA) directive is being phased in from November 2028, requiring structured e-invoicing for cross-border VAT transactions, with domestic requirements following by 2030.
Most Irish sole traders are below the €42,500 VAT registration threshold, so ViDA won't directly affect them initially. But the direction of travel is clear: digital records are becoming the standard everywhere. Building good habits now — timestamped invoices, categorised expenses, income tracking — means you won't be scrambling when the rules catch up.
How AutoInvoice Helps
AutoInvoice is built specifically for sole traders who invoice the same clients regularly. Every invoice is timestamped, stored securely for 5+ years, and available for export at any time. Here's what that gives you for MTD readiness:
- Digital records from day one — every invoice is a dated, numbered, stored digital record. No scanning, no typing up notebooks.
- Income tracking by quarter — Pro users get quarterly income breakdowns that match MTD reporting periods (Q1: 6 Apr – 5 Jul, etc.).
- Expense tracking — log business costs by category. Solo users get manual entry; Pro users can photograph receipts and let OCR extract the details.
- Year-end summary — export your annual income and expenses as a CSV or PDF. Hand it to your accountant or use it for your own records.
- 5-year secure storage — HMRC requires you to keep records for at least 5 years after the 31 January filing deadline. Your invoices are stored on EU-encrypted servers with row-level security.
Important note: AutoInvoice is not currently a registered HMRC MTD submission product. We build the digital record trail that MTD requires, but direct quarterly submission to HMRC via their API is on our roadmap for later in 2026. We'll update this page when that feature launches.
What Should You Do Right Now?
If you're a UK sole trader earning above £20,000, here are the steps to take today:
- Check your threshold.Look at your gross income for the current tax year. If you're above £50,000, you need to be ready by April 2026. Above £30,000? April 2027.
- Start keeping digital records now.Don't wait until the deadline. The transition is much easier if you already have 6–12 months of digital invoices stored.
- Choose software built for your size.You don't need a full accounting suite. You need something that sends invoices, tracks income, and keeps clean records. That's what AutoInvoice does.
- Talk to your accountant.If you use one, let them know you're preparing for MTD. They may have a preferred tool or can advise on the transition.
For the full official rules, see HMRC's Making Tax Digital for Income Tax guidance on GOV.UK. AutoInvoice offers a free 30-day trial — no credit card required. You can add your first client and send your first invoice in under five minutes. Start your free trial →