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Many sole traders and landlords are worried that Making Tax Digital means more administration. But, the reality is often the opposite. With the right software, MTD can make it easier to stay organised, reduce mistakes and give you a better picture of your finances and tax position throughout the year. That’s not all either.
In this guide, we'll explain the key benefits of Making Tax Digital and show how Coconut can take the stress out of staying compliant, with tools to manage your bookkeeping and bridging software for anyone who prefers working in spreadsheets.
What is Making Tax Digital?
Making Tax Digital is HMRC’s way of modernising the tax system - moving away from annual paper-based reporting towards digital recordkeeping and regular submissions. From April 2026, sole traders and landlords earning above the qualifying threshold need to keep digital records and submit quarterly updates using compatible software.
In April 2026, the qualifying threshold included those earning over £50,000. From April 2027, this will drop to £30,000 and in April 2028 any sole trader or landlord earning over £20,000 will need to comply.
Although this sounds like a major change, it actually brings several advantages. And it doesn't have to mean more work either. Using HMRC-recognised software like Coconut can simplify much of the day-to-day admin by helping you keep digital records, track income and expenses, and stay on top of your tax throughout the year.
And, if you already use spreadsheets, Coconut's bridging software lets you submit directly to HMRC without changing your existing way of working.
The biggest benefits of Making Tax Digital
Less stress at tax return time
Where you may have previously left everything until the end of the tax year, you’ll now update your records throughout the year. This means less paperwork to sort through and fewer last-minute surprises. Even better, you can be sure your records are accurate.
Fewer mistakes
Manual bookkeeping increases the chance of missed expenses, duplicate entries, incorrect figures and calculation errors. Digital software, like Coconut, automatically categorises transactions and stores records securely.
Clearer view of your tax
One of the biggest MTD benefits is visibility. Rather than wondering what your tax bill might be, Coconut gives you a better understanding of your income, expenses and estimated tax position throughout the year. This makes budgeting easier.
Save valuable time
Instead of spending hours every month looking for receipts and reconciling bank transactions, Coconut automates it for you. In short, bank transactions are imported, payments matched, receipts stored digitally and expenses organised at the click of a button. This means you have more time to grow your business.
Easier compliance
HMRC requires those within MTD to use compatible software, like Coconut. When you do sign up, it means quarterly updates become part of your normal bookkeeping routine rather than another task to stress over.
Is Making Tax Digital really more work?
It’s a common concern but, for most people, the opposite is true. The main changes under MTD are:
- Digital records must be kept
- Quarterly updates must be submitted to HMRC
- A final end of year statement must be completed
- Compatible software must be used.
While you’re required to report more frequently, the work is spread across the year instead of building up until January. And once you’re signed up to Coconut, which does most of the heavy lifting for you, many users find bookkeeping becomes quicker and easier than managing paper records.
How Coconut helps make MTD easier
Making Tax Digital doesn’t have to be overwhelming. Coconut is designed for sole traders and landlords and helps you to:
- Keep digital records
- Automatically categorise income and expenses
- Track receipts
- Understand your estimated tax throughout the year
- Prepare for quarterly submissions with confidence
But instead of just helping you to meet HMRC’s requirements, Coconut makes everyday bookkeeping simple by giving you visibility over your finances and reducing the admin that often comes with tax season. Even better, you can try it today with a free 14-day trial.
