MTD for Income Tax: what UK sole traders need to know

Making Tax Digital for Income Tax (MTD for ITSA) is HMRC's new way of reporting self-employed income. From April 2026, if you're a sole trader earning over £50,000 a year, you'll need to keep digital records and send HMRC a summary every three months. The £30,000 threshold kicks in from April 2027, and £20,000 from April 2028. Keepr does the quarterly submissions for you.

What is MTD for Income Tax?

MTD for Income Tax (the full name is Making Tax Digital for Income Tax Self Assessment, often shortened to MTD ITSA) replaces the single yearly tax return with four quarterly updates plus a final declaration at the end of the tax year.

You'll send HMRC a running total of your income and expenses every three months using HMRC-recognised software. The yearly Self Assessment return is being phased out for people in scope.

Tip: Self Assessment is the annual tax return HMRC asks self-employed people to file. Under MTD, it becomes a final declaration that ties together your four quarterly updates.

When do you need to sign up?

It depends on your gross self-employment and property income (your turnover before expenses), not your profit. HMRC is rolling MTD out in stages:

HMRC looks at the turnover on your most recent Self Assessment return. For April 2026, that means your 2024–25 return. If you're over the threshold, HMRC will write to you, but don't wait for the letter to get set up.

Warning: Earning under £20,000? You're not in MTD yet. Keep filing your normal Self Assessment return at gov.uk/self-assessment-tax-returns.

What are the quarterly update deadlines?

You send a cumulative total of your income and expenses four times a year. The standard quarters and deadlines are:

After Q4 you have until 31 January the following year to send your final declaration. That's the bit that confirms your full-year figures and triggers your tax bill, the same deadline as as the old Self Assessment.

What software do you need?

HMRC won't accept paper returns or spreadsheets sent by email any more. You need HMRC-recognised software that can:

1. Keep digital records of every bit of income and every expense.
2. Send your quarterly updates straight to HMRC over a secure connection.
3. File your final declaration at the end of the tax year.

Keepr does all three. You don't need a separate bridging tool or spreadsheet.

How Keepr handles MTD

Everything lives under Tax in the left sidebar. Open the MTD hub and you'll see your MTD hub for the current tax year.

Step 1 — Connect your HMRC account

1. Open the MTD hub from the sidebar.
2. Type your National Insurance number into the box (9 characters, e.g. AB123456C. You'll find it on your tax letters or payslips).
3. Click Connect HMRC Account. You'll be sent to gov.uk to sign in with your Government Gateway details and approve the connection.
4. Once you're back in Keepr, you'll see a green HMRC account connected message.

Tip: You only do this once. Keepr keeps the connection live and refreshes it in the background.

Step 2 — Keep your records up to date

As long as you log income and expenses as you go, your quarterly figures build themselves. Use the orange + Add new… button in the top-left sidebar to add:

1. Create Invoice — for work you've billed.
2. Add Paid Income — for money received that doesn't need an invoice.
3. New Expense — for anything you've spent on the business.

Step 3 — Submit each quarter

When a quarter is due, the MTD hub shows a big blue card with the next action. For example: "Your next step: send your Q1 figures to HMRC".

1. Open the MTD hub.
2. Check the income and expense totals match what you'd expect. If something's missing, add it before you submit.
3. Click Submit Q1 now (the quarter number changes through the year).
4. Keepr sends the figures to HMRC and stores the receipt in your submission history.

Warning: Quarterly updates are cumulative. Q2 includes everything from Q1 too. Keepr handles this automatically, but it means a mistake in Q1 carries forward until you fix it.

Step 4 — Send your final declaration

Once all four quarters are submitted, the MTD hub switches to a Ready for end of year card. This is where you confirm your full-year figures and any other income (employment, savings, dividends) before HMRC calculates your tax bill. Deadline: 31 January after the tax year ends.

A worked example

Sam is a freelance photographer. In 2024–25 he billed £62,000. That's over the £50,000 threshold, so from 6 April 2026 he's in MTD.

By 7 August 2026 he sends his Q1 update: turnover £14,200, expenses £3,100. He keeps logging jobs and receipts in Keepr through the year. By 7 May 2027 he's sent all four quarters. He has until 31 January 2028 to file his final declaration and pay the tax.

Common questions

Do I still need to file a Self Assessment return?

Once you're in MTD, the yearly Self Assessment return is replaced by the four quarterly updates plus a final declaration. If you've got other income (employment, dividends, savings interest), you add those at the final-declaration stage.

What if my income drops below the threshold?

You stay in MTD until your turnover has been below the threshold for the relevant tax year. You can't just opt out the moment you have a quiet quarter. Check the rules at gov.uk.

Can I correct a mistake after I've submitted a quarter?

Yes. Because quarterly updates are cumulative, you fix the entry in Keepr and the correction flows into the next quarter's totals. Bigger errors are squared up at the final declaration.

What happens if I miss a deadline?

HMRC uses a points-based penalty system: a point for each missed deadline, and a £200 penalty once you reach four points, plus another £200 for each miss after that. There are no penalties for missing a quarterly update deadline in the 2026-27 tax year, the first year it runs. That covers quarterly updates only, so the final declaration and any late payment are still in scope. Either way, set a reminder for the 7th of August, November, February and May.

Does MTD change how much tax I pay?

No. The rates and allowances are exactly the same. MTD only changes how you report, not what you owe. Your payment dates (31 January and 31 July) haven't changed either.

I'm a landlord too — does that count?

Yes. HMRC adds your self-employment and UK property income together when checking the threshold. If the combined turnover is over the limit, you're in. You'll send separate quarterly updates for each.

Ready to get set up? Connect Keepr to HMRC in under a minute. Open the MTD hub