A Plain-English Guide for Sole Traders

If you’re a sole trader, you’ve probably heard the phrase Making Tax Digital and thought: “Here we go… another admin headache.”

But here’s the good news: MTD doesn’t have to be complicated. With the right setup, it can actually make your bookkeeping simpler, your numbers clearer, and tax time less stressful.

This guide explains what’s changing, what you’ll need to do, and how to get ready without panic. And if you’d like a hand getting set up, Zenith Book Keeping can help (including a special early-2026 offer for new clients).

Note: This article is general information, not personal tax advice. Rules and start dates depend on your situation. Always check current HMRC guidance or speak to a professional.

What is Making Tax Digital (MTD) for Income Tax?

MTD for Income Tax is HMRC’s move toward digital record-keeping and more frequent reporting.

In practical terms, it means:

• You keep digital records of your business income and expenses
• You use MTD-compatible software
• You send regular updates during the year (rather than only dealing with everything at year-end)

For many sole traders, the biggest shift is mindset: instead of “sorting it all out later,” you build a light-touch routine that keeps you up to date.

When does MTD for Income Tax start?

MTD for Income Tax is being introduced in phases, and April 2026 is the headline date many sole traders are hearing.

Because eligibility depends on income thresholds and other factors, the safest approach is:

• Assume it’s coming
• Get your records and process ready early
• Confirm your specific start date with a professional

What will change for sole traders (in plain English)

1) You’ll need to keep records digitally

This doesn’t mean you need to become an accountant.

It means you’ll stop relying on:

• shoebox receipts
• bank statements only
• last-minute spreadsheets

Instead, you’ll capture income and expenses in a system as you go.

2) You’ll send updates during the year

Rather than one big annual scramble, you’ll send periodic updates.

This is often a positive change because:

• You see your numbers earlier
• You can set aside tax more confidently
• You spot problems (or opportunities) sooner

3) You’ll need software that’s compatible

Some people already use tools like Xero, QuickBooks, FreeAgent, Sage, etc. Others use spreadsheets.

Under MTD, you’ll need an approach that meets HMRC’s digital requirements.

The key point: the “best” software is the one you’ll actually use consistently.

The real risk: leaving it too late

Most MTD stress will come from one thing: trying to change your system at the same time as you’re trying to run your business.

If you wait until the last minute, you risk:

• rushed setup
• messy records
• missed deadlines
• unnecessary fees and stress

Getting ready early means you can make the change calmly, with minimal disruption.

A simple MTD-ready setup (that works for most sole traders)

Here’s a realistic approach that keeps admin light.

Step 1: Separate business and personal money

If possible:

• Use a dedicated business account
• Use a dedicated business card

This one change makes everything easier to track.

Step 2: Choose a capture method for receipts

Pick one method and stick to it:

• Snap receipts on your phone and upload weekly
• Email invoices to a dedicated “receipts” inbox
• Use an app that captures and matches receipts to transactions

Step 3: Create 8–12 simple categories

You don’t need 50 categories.

A simple set might include:

• materials/stock
• travel/mileage
• marketing
• software/subscriptions
• phone/internet
• insurance
• professional fees
• training
• home working (if relevant)

Step 4: Do a weekly 10-minute tidy

Once a week:

• check transactions
• categorise anything new
• flag anything unclear
• upload any missing receipts

This prevents the “year-end mountain.”

Step 5: Do a monthly 30-minute review

Once a month:

• total income
• total expenses
• estimated profit
• tax set-aside transfer

This links directly to the earlier articles in this series: clarity reduces stress.

Common MTD mistakes (and how to avoid them)

• Thinking MTD is only an accountant’s problem (it’s a process problem)
• Choosing software you don’t understand (simple beats fancy)
• Not keeping evidence (receipts still matter)
• Mixing personal and business spending (creates confusion fast)
• Trying to “catch up” in one weekend (build a small routine instead)

How Zenith Book Keeping can help

MTD is much easier when your system is set up properly from the start.

Zenith Book Keeping can help you:

• choose the right MTD-compatible software for your business
• set up categories and workflows that make sense
• Keep your records clean and compliant
• Build a simple weekly/monthly routine you can actually maintain
• make sure you’re ready well before deadlines

If you already use software, Zenith can help you get the best from it. If you don’t, they’ll guide you to the best option, so your record keeping and planning become as easy as 1-2-3.

Takeaways

• MTD is a shift toward digital records + regular updates
• The easiest way to succeed is to start early and keep it simple
• A weekly 10-minute tidy prevents year-end panic
• The right software is the one you’ll use consistently
• Getting support now can save hours of stress later

Ready to get MTD-ready in early 2026?

If you’re a sole trader and you want to get ahead of MTD without the stress, now is the perfect time to set up a simple system.

Zenith Book Keeping is currently running a special early-2026 discounted offer for new clients.

Take a look at Zenith’s current offer and speak to the team about getting MTD-ready the easy way.