Making Tax Digital (MTD) has been the slow-moving news story of UK self-assessment for the best part of a decade. If you’re a sole trader tradesperson, it’s now close enough to matter — so here’s the plain-English version of what it is, who it applies to, what it changes in practice, and how to get ready without spending a fortune on software.
What MTD actually means
MTD is HMRC’s programme to get income tax, VAT and corporation tax all administered through digital records and digital submissions, instead of paper returns and one big year-end push. For VAT-registered businesses, MTD has been compulsory for years. For Income Tax Self Assessment — the thing most sole trader tradespeople file — it’s been phased in over 2026 and 2027.
The high-level rule: if your qualifying gross income from self-employment and property is above HMRC’s threshold, you have to keep digital records and submit quarterly updates through HMRC-compatible software, plus a final end-of-period statement and final declaration each year. The thresholds have been tiered: larger earners first, smaller earners later. HMRC publish the current thresholds and start dates on gov.uk — always check there for the figure that applies to you before making plans.
What changes day-to-day
For a sole trader used to stacking up receipts in a box and handing them to an accountant in January, MTD means three practical changes:
- Digital records. You can no longer keep only paper records. Each transaction needs to be recorded in software, and the software has to store enough detail that HMRC’s data flow works end-to-end.
- Quarterly updates. Instead of one annual return, you send four quarterly updates summarising your income and expenses to HMRC through your software.
- Final declaration. At year-end you finalise the numbers and submit an end-of-period statement plus a final declaration, replacing the old annual SA return.
In practice, most tradespeople still use an accountant — the accountant takes your digital records, cleans them, and submits them on your behalf. The difference is that you have to give them clean digital data rather than a carrier bag of paper.
What counts as a digital record
HMRC isn’t fussy about which software you use as long as it can talk to their API (the official phrase is “functional compatible software”). The key points are:
- Each sale and each expense needs to be recorded with enough detail — date, amount, category — that the software can roll it up correctly.
- Receipts don’t have to be paper anymore. A photo stored alongside the expense counts.
- Bridging software is allowed — you can keep records in one tool and use another to submit, as long as there’s a digital link (not manually re-typed numbers).
This is where an app like Yoley earns its keep: every invoice, every expense and every receipt photograph is captured digitally as you work, mapped to an HMRC category, and exportable in a clean format for your accountant or a downstream submission tool.
How to get ready this quarter
If you’re close to the MTD threshold, now is the time to clean up your workflow. Specifically:
- Stop writing invoices in Word or Excel. Move to an app that captures them as structured data.
- Stop keeping receipts in an envelope. Start scanning as you go. Yoley’s on-device OCR pulls totals and VAT automatically; other apps do the same. The key is that the digital record exists.
- Talk to your accountant early. They’ll tell you what format they want the data in and whether they’ll submit on your behalf.
- Check which tools are HMRC-recognised for submission. Some accountancy software submits directly; some trade apps export to accountancy software that submits. Yoley currently exports to CSV/PDF for onward submission by your accountant.
- Don’t panic-buy software. The most expensive bookkeeping app isn’t necessarily the one that fits how you work on the tools.
A note on costs
The government’s intention with MTD is efficiency, but for a lot of sole traders it has raised the real cost of being compliant — suddenly you’re paying for software you didn’t need before. This is part of why Yoley is free on the core plan: a sole trader shouldn’t have to pay £30/month just to meet a record-keeping requirement. A free, iPhone-native option for the day-to-day, paired with an accountant at year-end, is a perfectly reasonable MTD setup for a small trade business.