To be so confused with making tax digital!

[Fillyourdreams]

I'm a self employed sole trader. I know I need to start using MTD from April this year and I will be inputting my income and expenses going forwards then submitting the figures quarterly with the final declaration been done in January 2027.
But another sole trader in the same line of work has said I need to have been doing this now so back dating it to the current tax year.
Who is right help!!

The other person may have been taking part in the trial

What’s your income? Not everyone needs to MTD.

You CAN do it now, but don’t HAVE to.

I’ll be starting from the new tax year.

I know for some things there are thresholds that determine when you have to do it- if I wasn’t selling my BTL I’d still be exempt due to not making enough income from it.

These who are doing it in the current tax year are part of the voluntary trial

mtd doesn't start until April 2026 for these with qualifying income above the threshold

The other person not on a trial but she thinks you need to be doing it now ready for April 26.
I think you need to start doing it in April 26 onwards.

I’ve been going through it tonight for a friend

Anyone who has already been doing MTD are as part of voluntary trials
The first mandatory MTD begins this year (tax year 2026/27) and anyone required will be notified by HMRC by letter, but the thresholds and timing have been published :

If your 2024/25 gross income was >= £50,000 then you are required to begin MTD for 2026/27 with the fiat quarter of 6 April to 5 July being due to be submitted on 7 August
(HMRC are not going to be giving late penalties for quarterly submissions for those on year one - but all
of the quarters will have to be submitted before the year end final submission which would have the usual late penalties)

Next will be a gross income of >= £30,000 for the year 2025/26 and they will be required to compete MTD for 2027/28, followed by >= £20,000 for the year 2028/29

**
Obviously I’m not giving tax advice ….. but we read it as:

2024/25 The deadline date of 31/1/26 has just happened

2025/26 This FY ends in a couple of months, and the existing tax processes remain with a submission deadline of 31/1/27

2026/27 The FY will begin in a couple of months, with quarterly MTD reporting due from August, but the final submission deadline won’t be until 31/1/28
This does mean that people could be doing initial quarterly 26/27 reporting before having done their 25/26 submission

It might result in some being more “speedy” to get things out of the way in a more “sensible”
order

There are webinars available from the link below, you can register for the next live webinar for the most up to date information and to ask questions or watch a previous recording.

www.gov.uk/guidance/help-and-support-for-making-tax-digital

Do you submit this through an app? I am a year away from threshold so just curious how it works.

No, you have to use software approved by HMRC, little to none of which was free the last time I looked - if like me you have custom spreadsheets built for your business which are entirely fit for purpose, they're no good either unless you buy/use special bridging software.

Obviously you need to obtain and also learn how to use this software, in addition to doing the extra unpaid admin when you could be actually running your business. I'm thrilled about it.

Having to pay for commercial software for MTD is a total piss take.

MTD just looks like a load more cost and admin for absolutely zero benefit for the taxpayer.

I really don’t understand the point of this. So many sole traders do their own accounts but are not accountants. This is just another way the government is making life harder for people running small businesses.

I don’t use any accounting software but am perfectly able to complete my tax return. I do object to having to buy new software that I have no interest in using that is going to be hard and time consuming for me to use. And will make zero difference to the amount of tax I pay.

Who decided this was a good idea?

You don’t need to pay, I have software free with my free business bank account.

This link should ask a couple of questions on your type of return / what sections of self assessment you need to complete (sole trader, VAT or not etc) then will give you a list of software available.
For my friend it first offers 46, then when filtered to free has 17

https://www.tax.service.gov.uk/find-making-tax-digital-income-tax-software/how-will-you-use-it

Next is whether you will use the software for the full return or will need software that is capable of ‘bridging’ from your own records
She does run her existing record on spreadsheet but is not keen on the added element of hoping it all links properly so will be looking at the choices to enter it all directly - double effort, but keeping it ‘simple’

The good news for me is that I am far below all of the thresholds so it won’t affect me …… unless it comes to me at a later date

I'm a bit panicky about MTD.
So can I just check I've understood this all correctly please?
I earn around £33k as a sole trader. I've just paid my tax bill for 24/25 year. I do my own Self Assessment tax form as my accounts are pretty simple.

SO. I'm thinking I can carry on as I am for this next tax year, and submit my Self Assessment as before for tax year 25/26.

Then, this time next year, I need to be getting the new MTD software to record my income/outgoings starting from April 27??

Is that right?

my situation is similar to yours, @blanketsnuggler . It is very frustrating. I struggle with spreadsheets and can’t fathom how I’ll cope with this new software. I expect I’ll end up paying an accountant.

It will probably cost me over a grand a year, all told. All for dealing with the simplest of accounts - they literally fit on the back of a proverbial envelope!

Yep.

If you have the right bank account you can get the software free with it so you don’t need to pay anything extra.

It’s from next year if your self employed turnover is >£50k, it’s not required for this year.

I used to have a ltd co. Managed all my accounts / tax simply, with about half an hour of professional accounting time.

Covid happened and many things changed so I closed the company and have since been self employed. Managed all my accounting / tax easily.

Now this!

I was thinking about winding down as I approached retirement. MTD has been the nail in the coffin. I'm not doing that!

It’s from this April if you earn over 50k.

Yes

At £33k you are below the first threshold of £50k, so will expect to be in the second years threshold of £30k and begin with the April 2027 trading year

(And to be sure, HMRC will be writing to businesses when their applicable self assessment submission hits the threshold)

https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords

Just a clarification though - is your £33k your gross / turnover or your profit?

The threshold is turnover before deduction so £33k gross is not yet due for MTD but £33k profit probably exceeds £50k turnover

Yes you’re right, I meant the next tax year but I see I worded it badly!

This . It’s encouraging those less tech savvy to fly under the radar or give up .

I'm also very, very fed up about it.
I use Excel too, and don't want to pay an accountant or for accounting software.
I don't need to do it this coming April but I'm going to sign up for the trial so I get a year of doing it where it doesn't matter how wrong I get it.

Also, ChatGPT has been excellent at talking me through it all at my pace and my level, and is going to help me tweak my spreadsheets to fit with the bridging software. I can ask as many questions as I need to and it doesn't mind. It's not always right so be a little careful, but it's really helped me, way more than the webinar.