Self Assessment vs Making Tax Digital: What's Changing for Sole Traders

If you're a sole trader, Self Assessment is probably the tax routine you know — one return a year, one deadline in January, and a deep breath while you pull together twelve months of figures. Making Tax Digital for Income Tax (MTD for ITSA) is changing that, and it's the biggest shift in how sole traders report to HMRC in a generation.

This guide explains what's actually changing, what stays the same, and what it means for your day-to-day admin — in plain English, without the jargon.

Self Assessment: the system you know

Under Self Assessment, you report your business income once a year on a tax return. You gather your figures for the whole tax year, enter them into the return (or give them to an accountant), submit it to HMRC by 31 January, and pay what you owe. It's a once-a-year task, but that's also its weakness — it encourages a year-end scramble and leaves you with little visibility of your tax position until the return is done.

Self Assessment has been the default for sole traders and landlords for decades. If you've been self-employed for any length of time, this is almost certainly how you've been reporting your income.

Making Tax Digital: what replaces it

Making Tax Digital for Income Tax keeps the same underlying tax rules, but changes how and when you report. Instead of one annual return, you keep digital records throughout the year and send HMRC a summary every quarter, plus a final declaration at year-end. All of it goes through HMRC-recognised software — you can't file manually the way you can with a Self Assessment return.

The point of MTD isn't to collect more tax. It's to make record-keeping more accurate and give you a clearer view of your tax position through the year, rather than a single backwards-looking return after the year has ended.

The key differences, side by side

Here's how Self Assessment and Making Tax Digital compare for a sole trader:

• Reporting frequency — Self Assessment: once a year. MTD: quarterly updates plus a final declaration.
• How you file — Self Assessment: online form or paper return. MTD: HMRC-recognised software only.
• Record keeping — Self Assessment: records in any format, including paper. MTD: digital records with digital links between each step.
• Visibility of tax due — Self Assessment: calculated once, at year-end. MTD: live estimates update as you record income and expenses.
• Deadlines — Self Assessment: one (31 January). MTD: four quarterly deadlines plus a final declaration deadline.
• What stays the same — the tax you pay, the payment dates (31 January and 31 July), and the rules on allowable expenses and reliefs.

Who moves across, and when

MTD for Income Tax is being rolled out in stages based on your gross business or property income (your turnover before expenses, not your profit):

• From 6 April 2026 — sole traders and landlords with gross income over £50,000 per year.
• From 6 April 2027 — those with gross income over £30,000 per year.
• Below £30,000 — you continue under Self Assessment for now, though HMRC has consulted on bringing this group in later.

If your turnover crosses a threshold during a tax year, you're brought into MTD from the following tax year — so it's worth knowing which band you're in before each April.

What stays the same under MTD

The shift to MTD sounds big, but a lot of the underlying tax mechanics are unchanged. Specifically:

• The tax you pay is calculated the same way — MTD doesn't change your rates, bands, or allowances.
• Payment dates stay the same — 31 January (balancing payment + first payment on account) and 31 July (second payment on account).
• Allowable expenses work the same way — what you could claim under Self Assessment, you can still claim under MTD.
• The Self Assessment payment system remains — you still pay through the same HMRC payment routes.

In other words, MTD changes how you report, not how much you pay or when you pay it. The adjustment is about frequency and format, not a new tax.

What actually changes in your day-to-day

The practical shift for most sole traders is less dramatic than it sounds. Under Self Assessment, the work piles up at year-end. Under MTD, the same work is spread across the year in smaller, more manageable pieces.

Instead of reconstructing twelve months of transactions each January, you log income and expenses as they happen in your software. Each quarter, the software totals everything and prepares a summary for you to review and submit. By year-end, your final declaration is mostly a review exercise — the figures are already there.

Most sole traders who switch say the quarterly rhythm actually reduces their tax admin stress, because nothing builds up into a single deadline mountain.

Do I still need to do a Self Assessment return?

Once you're fully in MTD for Income Tax, your quarterly updates and final declaration replace the Self Assessment return for your business income. You won't file a separate SA103 self-employment page.

However, you may still need to complete a Self Assessment return if you have other income that falls outside MTD for Income Tax — for example, employment income above the PAYE threshold, or certain other untaxed income. HMRC will tell you if you still need to file.

If you're below the MTD thresholds, you continue using Self Assessment exactly as you do today. Nothing changes for you until your income crosses the threshold.

How to make the switch

Transitioning from Self Assessment to MTD is straightforward when you know the steps:

• Choose HMRC-recognised MTD software — AppyTax is built for sole traders and handles records, quarterly submissions, and your final declaration in one place.
• Sign up for MTD for Income Tax through your software or HMRC's online service — your provider will guide you through linking your HMRC account.
• Move your existing records across — most software, including AppyTax, accepts CSV imports from spreadsheets and older bookkeeping tools, so you keep your history.
• Start recording digitally — log income and expenses as they happen so your first quarterly update is ready when it's due.
• File your first quarterly update by its deadline — from that point on, you're in the MTD rhythm.

Common worries, answered

'Will I pay more tax?' No. MTD changes how you report, not how your tax is calculated. The same income, expenses, and allowances apply.

'Is it more work?' It's more frequent, but not more work overall — the same records you'd assemble at year-end are simply kept through the year instead. Most sole traders find it lighter in practice.

'What if I miss a quarterly deadline?' HMRC uses a points-based system — each missed deadline adds a point, and reaching the threshold triggers a £200 penalty. Good reminders (which AppyTax sends automatically) make this almost entirely avoidable.

Ready to move off Self Assessment?

If you're approaching the £50,000 threshold or already above it, the smartest move is to switch to MTD-compliant software before your first quarter begins. AppyTax guides you through the sign-up, connects your HMRC account securely, and sets up your quarterly calendar automatically based on your accounting period — so the transition feels like nothing happened, except your tax admin got quieter. Subscribe and you'll be MTD-ready in minutes.