by David Thomas, freelance business skills trainer
From April 2026, there’s a big change to reporting requirements for sole trader freelancers and many journalists and comms workers risk being caught up in the change. This guide talks you through what’s coming, and specifically refers to people who are registered as self-employed and fill in a tax return at the end of each tax year.
What’s going to change?
Soon sole traders will have to report invoice totals and business cost totals every three months during the actual tax year. To be clear this means you will need to report as you go along. This is a big change from leaving everything to the end of each tax year when you submit a tax return.
HMRC will also need sole traders to use specially authorised commercial software to do this. You won’t be inputting the data manually for these quarterly returns, you’ll be pressing a button on the software to report information you’ve already collected – again, to be clear, as you go along.
Who’s affected?
The first group of sole traders to be in this regime will be sole traders (and landlords) with annual business turnover greater than £50,000. Turnover refers to the total of invoicing, not your profit figure. They will be reporting quarterly in the tax year that starts on 6th April 2026.
The income that counts towards this total is called ‘qualifying income’. You can read a full definition of qualifying income here on gov.uk, but in short, it’s the total of all your invoicing, plus rental income if you are renting out a property. It does NOT include PAYE income, even if you consider yourself a PAYE freelancer.
How will I know if I’m included from April 2026?
HMRC will be looking at the total turnover in the tax year 2024-25. This is the year with the tax return deadline of 31st January 2026. HMRC will look at the totals for 2024-25 to work out whether you’re going to have to use the new MTD reporting system from 6th April 2026.
What if I invoice less than £50,001 per year?
More sole traders will be brought into this system in the following year. So if you have qualifying income more than £30,000 in the tax year 2025-26, you’ll have to use the Making Tax Digital reporting system for the tax year that starts on 6th April 2027.
Sole traders with a turnover more than £20,000 will be drawn into the MTD system from 6th April 2028. If you become a sole trader (or landlord) after 6 April 2026 you won’t have to get set up for Making Tax Digital until after you have submitted your first self-assessment tax return. You can sign up to use MTD software voluntarily at any time though.
What does ‘being in the Making Tax Digital system’ actually mean?
It means using special HMRC-authorised accounting software to record invoicing (turnover) and business costs (tax-deductible expenses, excluding capital equipment) in real time. It also means pressing a button on the software at the end of each three month period (aka ‘quarter’) to report those two figures to the tax office.
So a tax return four times a year?!?!
Not quite a tax return four times a year. It’s just turnover and costs totals every three months. And these can be adjusted if you need to. At the end of the tax year you will do a final tax return as normal. The deadline to do this remains unchanged for the moment, ie 31st January in the following tax year.
How will I know what software to get?
There will be quite a lot of options, so ask around. See what other people find user-friendly. If you have an accountant they may suggest software they’d like you to use. If they suggest something a bit too accountant-y for you, push back politely and suggest something you might prefer. There is a list of current MTD-authorised software on gov.uk.
See the latest here: https://www.gov.uk/guidance/find-software-thats-compatible-with-making-tax-digital-for-income-tax
Is the software free?
Ah. There might be free options, for example FreeAgent’s deal with the NatWest Mettle mobile business account. Otherwise we’re looking at typically £200 per year or more for your software subscription. Personally I think this is a moral problem – making people pay to pay their taxes. But also personally, I don’t think digitisation is a bad idea in this day and age and it can simplify and streamline your bookkeeping so could save you time – and money – in the long run.
I already have an accountant. Do I really need to get into this?
Yes. The relationship between you and your accountant will change. For example, do you want them to do everything for you four times a year, plus the final tax return? They will bill you five times, no doubt, and it might not be the best arrangement anyway. You will also need to discuss with them if they have a deal to get cheaper software. And will they set it up and give you a log in to report the quarterly figures? Or will you set it up and give them a log in to check the figures at the end of each year? That latter option sounds cheaper to me.
Will I have to pay tax every three months?
No. This is just about reporting information. It doesn’t change the tax payment deadlines.
And if I hate tech…?
If you earn over the thresholds, you can apply for an exemption. But on very limited grounds. To quote from the HMRC guidance, you might be ‘digitally excluded’ if:
- it’s not practical for you to use software to keep digital records or submit them
- you are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications
It’s one of those things which will eventually settle down and we’ll wonder how we ever used spreadsheets and shoeboxes. A personal observation: I’ve been using this kind of accounting software for five years, and I can’t imagine running my business without it. I basically do record keeping and keep an eye on all the finances on the app on my phone. I also like the fact that the software can be linked to the bank account I use for my business affairs. That alone helps automate boring record keeping.