Making Tax Digital for sole traders: what it means for your records

5 min read

Making Tax Digital for Income Tax changes how sole traders keep records and report to HMRC. The headline change is simple: your income and expenses have to be kept digitally, not on paper.

The short version

  • • It applies based on your qualifying income from self-employment and property, phased in from April 2026.
  • • Records of income and expenses must be kept digitally rather than on paper.
  • • You send quarterly updates to HMRC as well as a final year-end return.
  • • Photographing receipts as you go is the easiest way to be ready.

What Making Tax Digital actually is

Making Tax Digital for Income Tax is a new way of doing Self Assessment for sole traders and landlords. Instead of pulling a year of paperwork together once a year, you keep your income and expenses in digital form and send HMRC updates during the year.

It does not change what you can claim. Tools, van costs, materials, work clothing and the rest are treated exactly as they were. What changes is how the records are kept and how often you report.

When it applies to you

Whether you are in depends on your qualifying income — broadly your gross self-employment and property income before expenses — and HMRC is phasing it in by income level from April 2026 onwards, with lower thresholds following in later years.

Thresholds and dates have changed more than once, so check your own position on GOV.UK or with your accountant rather than assuming. HMRC also writes to people it believes are affected.

What 'digital records' means in practice

It means the details of each sale and each cost are recorded in software rather than written in a book or left in a carrier bag. You still keep the underlying receipt, and a clear photo counts as a digital copy.

For most tradespeople this is less work than it sounds. Photographing a receipt at the merchant's counter takes seconds and removes the year-end scramble entirely — thermal till receipts fade within months anyway.

  • • Date, supplier and amount for every business cost
  • • A legible copy of the receipt or invoice
  • • What you invoiced and what was actually paid
  • • Mileage and any business/private splits you applied

Quarterly updates

Under Making Tax Digital you send HMRC a summary of your income and expenses every quarter, then a final declaration after the tax year ends. The quarterly updates are summaries, not full tax returns, and they are not the point at which your tax is finalised.

The practical effect is that you cannot leave everything until January. Keeping on top of receipts as they happen is what makes the quarters painless.

Getting ready without changing how you work

You do not need to become an accountant. Photograph receipts as you get them, keep your invoices in one place, and make sure whoever does your return can get a tidy set of records covering the whole period.

That is exactly what ClaimMate is for: snap the receipt, check the amount and category it picked up, and your accountant gets an organised export whenever they need it.

Where this comes from

Check your own receipts

ClaimMate reads the receipt, tells you whether it's claimable and why, and keeps a tidy record for your accountant. See the full guide to claiming expenses.

Sort my first receipt

More guides

General information about published HMRC guidance, not tax advice.