The biggest change to UK self-employment tax in a generation — here's everything you need to know.
Making Tax Digital (MTD) is a UK government initiative led by HMRC to modernise the tax system. Instead of filing one annual Self Assessment tax return, sole traders and landlords will need to keep digital records and submit quarterly updates to HMRC using compatible software.
The goal is simple: fewer errors, less tax fraud, and a clearer picture of your finances throughout the year — not just at the end of it.
MTD for Income Tax Self Assessment (MTD for ITSA) applies to sole traders and landlords. The rollout is happening in phases based on your income:
From April 2026: If your gross income is over £50,000, you'll need to comply with MTD for ITSA. This means keeping digital records and sending quarterly updates to HMRC.
From April 2027: The threshold drops to £30,000, bringing many more sole traders into scope.
Future phases: HMRC has signalled it will eventually extend MTD to those earning below £30,000, though exact dates haven't been confirmed yet.
Under MTD, you'll need to:
1. Keep digital records — No more shoeboxes of receipts. Your income and expenses must be recorded digitally using MTD-compatible software.
2. Send quarterly updates — Four times a year, you'll submit a summary of your income and expenses to HMRC through your software. These aren't full tax returns — think of them as progress updates.
3. Submit a final declaration — At the end of the tax year, you'll confirm everything is correct and make any adjustments. This replaces the traditional Self Assessment tax return.
HMRC will introduce a points-based penalty system for late submissions. Each missed quarterly update earns you a point, and once you hit the threshold, you'll receive a £200 penalty. There are also penalties for late payments. The message is clear: staying on top of your records throughout the year is no longer optional.
This is exactly why we built Snapfile. We know that most sole traders didn't get into business to do paperwork. Snapfile makes MTD compliance as simple as sending a WhatsApp message:
Snap a receipt — Our AI extracts the vendor, date, amount, and VAT automatically.
Type an expense — Just message "Fuel £40" and we'll log it, categorise it, and calculate the VAT.
Stay compliant — Your records are kept digitally from day one. When our Pro plan launches (pending HMRC approval), we'll submit your quarterly updates directly to HMRC for you.
No complicated software to learn. No spreadsheets. No stress. Just WhatsApp.
We're currently going through HMRC's recognition process to become an approved MTD-compatible software provider. Our Free and Lite plans work as personal trackers right now (no HMRC submission required), so you can start keeping digital records today. Once our Pro plan receives HMRC approval, we'll handle the quarterly submissions for you automatically.
Join the waitlist to be first in line when Pro launches.
If you're any of the following, you'll need MTD compatible software:
Sole traders — Electricians, plumbers, builders, cleaners, personal trainers, tutors, delivery drivers, hairdressers, photographers, gardeners, and any self-employed person earning above the MTD threshold.
Freelancers — Web developers, designers, writers, consultants, marketing professionals, and any freelancer who files a Self Assessment tax return.
Landlords — Anyone earning rental income above the threshold, whether from a single buy-to-let or a property portfolio.
Small business owners — If you're a sole trader running a small business and your income is above the threshold, MTD applies to you.
The best MTD software should make compliance easy, not add more work to your day. Look for software that keeps digital records automatically, extracts VAT from receipts, generates quarterly reports in the right format for HMRC, and sends you deadline reminders so you never miss a submission.
Most importantly, it should be simple enough that you actually use it. That's why we built Snapfile to work entirely on WhatsApp — no complex dashboards, no accounting jargon, no learning curve. Snapfile is working towards full MTD support to help you when the time comes.
Do I need MTD software if I earn under £50,000? Not yet, but it's coming. HMRC will lower the threshold to £30,000 from April 2027, and further reductions are planned. Starting to keep digital records now means you'll be ready when MTD applies to you.
Can I use spreadsheets for MTD? HMRC requires MTD compatible software — a basic spreadsheet alone won't meet the requirements. However, some bridging software can link spreadsheets to HMRC. Snapfile is much simpler — just snap receipts on WhatsApp.
How much does MTD software cost? Prices vary widely. Snapfile starts at £0/month with a free plan. The Lite plan is £7.99/month for unlimited tracking, and Pro (with HMRC submissions) will be £13.99/month. That's a fraction of what most accounting software charges.
Is Snapfile HMRC recognised? Not yet. Snapfile is an expense tracker that is working towards HMRC's Making Tax Digital recognition. Our plans help you keep organised digital records. HMRC approval for direct MTD submissions is pending.
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