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Built for sole traders and self-employed people
Making Tax Digital for sole traders is changing how self-employed people keep records and report income tax to HMRC.
That means you'll need to keep digital records, send quarterly updates to HMRC and complete a year-end tax submission using compatible software.
Coconut helps keep that simple.
You can track self-employment income, sort expenses, store receipts, see your tax estimate and submit MTD updates to HMRC from one place - without complicated accounting software or messy spreadsheets.
If you’re used to doing your Self Assessment tax return once a year, Making Tax Digital can sound like a big change. The main difference is that your records need to stay up to date throughout the tax year.
Instead of pulling everything together at the end, you’ll keep digital records as you go and send quarterly updates through MTD-compatible software.
You’ll still finalise your income tax position at the end of the tax year. Coconut keeps that year-round process connected, so each deadline is easier to manage.
Making Tax Digital for Income Tax is HMRC's new way of asking sole traders, landlords and self-employed people to keep records and report income digitally.
If MTD applies to you, you'll need to:
You’re not paying tax four times a year: the main 31 January payment deadline still applies.
With Coconut, everyday record keeping, quarterly updates and your year-end submission stay in one app.
Bank statements, receipts, invoices and expenses can quickly turn the Self Assessment deadline into a last-minute sorting job.
Connect your bank account and Coconut securely imports transactions through Open Banking. You can then categorise income and expenses, store receipts and keep your digital records MTD-ready.
Your records stay in one place, your tax estimate updates as you go, and quarterly submissions become a review-and-submit job rather than a rebuild.
Instead of one big annual tax job, you can keep thing sticking along while you work.
Making Tax Digital for Income Tax is being introduced in stages based on qualifying income.
For sole traders, qualifying income usually means gross self-employment income before expenses, plus property income if you have it.
Here’s the simple version:
April
2026
Sole traders and landlords earning above £50,000 need to comply with Making Tax Digital for Income Tax.
April
2027
Sole traders and landlords earning above £30,000 need to comply with Making Tax Digital for Income Tax.
April
2028
Sole traders and landlords earning above £20,000 need to comply with Making Tax Digital for Income Tax.
The important bit is that this is based on incomebefore expenses, not profit.
For example, £52,000 of self-employment income stillcounts as £52,000 for MTD even if you have £12,000 of business expenses.
Qualifying income usually includes gross income from:
PAYE income, pensions, dividends and capital gains do not usually count.
If you’re employed and run a sole trader business on the side, it’s your gross self-employment and property income that matters for the MTD threshold.
If your income changes, check your position each year. The thresholds are dropping, so organising digital records early can save arush later.
Some people may be exempt from Making Tax Digital for Income Tax if using digital tools is not reasonably practical.
This can include reasons linked to age, disability, location or religion.
If you think that might apply to you, you’ll need to check the rules with HMRC and apply for an exemption.
Otherwise, getting used to digital record keeping before your deadline can make the change easier.
You can start using Coconut before MTD applies, so tracking income, sorting expenses and keeping digital records already feels familiar when your start date arrives.
Once MTD for Income Tax applies, there are three main things to do.
Keep digital records, send quarterly updates to HMRC and complete a year-end tax submission.
Coconut keeps the same records connected across all three steps.
Under MTD, you’ll need to maintain digital records of business income and expenses in compatible software.
Paper notes and loose receipts on their own won’t be enough.
Coconut securely imports bank transactions through Open Banking, helping you track self-employment income and expenses as they happen.
You can also store receipts against transactions, keeping your digital records tidier throughout the tax year.
Sole traders in MTD for Income Tax need to send four quarterly updates to HMRC each tax year.
These are summaries of income and expenses, not four full tax returns.
The standard quarterly update periods are:
6 April – 5 July
7 August
6 April – 5 October
7 November
6 April – 5 January
7 February
6 April – 5 April
7 May
Because Coconut keeps your records organised, each update becomes a review-and-submit step rather than a full admin job.
Quarterly updates don’t finalise your income tax for the year.
After the tax year ends, you’ll complete a year-end tax submission, also known as a final declaration, to confirm your full income tax position.
This is where you make final adjustments and confirm what you owe.
Coconut keeps your income, expenses, receipts and quarterly updates connected, so you’re not rebuilding everything in January.
1
Yes. If Making Tax Digital for Income Tax applies to you, you’ll need compatible software.
That doesn’t mean you need a complicated accountin package: your records and submissions simply need a digital connection to HMRC systems.
Coconut lets sole traders track income, sort expenses, keep digital records and submit updates in one place, without tools built for much bigger businesses.
2
Paper records on their own won’t meet MTD requirements.
You’ll need digital records and compatible software that can send the required information to HMRC.
If you already keep tidy spreadsheets and mainly need away to connect them to HMRC, MTD bridging software may be enough.
If you want one tool for tracking income, expenses, receipts, tax estimates and quarterly updates, Coconut’s full MTD software keeps the process together.
That means less moving figures between different tool sat each deadline.
3
You can try Coconut free for 14 days, with no card details needed.
The trial lets you see how Coconut tracks self-employment income, categorises expenses and keeps digital records ready for MTD for Income Tax.
Eligible new Zempler users may also be able to get Coconut free for 2 years when they sign up through Coconut, open a Zempler bank account and connect it in the app.
If you’re looking for free MTD software for sole traders, you can start with the trial or check whether you qualify for the Zempler offer.
Coconut is HMRC-recognised software for Making Tax Digital for Income Tax.
You can use it to keep digital records and send MTD updates securely to HMRC.
It also shows an income tax estimate that updates as your income and expenses change.
So you can see how your tax position is shaping up before January and plan ahead.
Check Coconut on the official HMRC software list.
Coconut is built for the way sole traders actually earn and manage money.
Whether you're a freelancer, contractor, tradesperson, online seller or self-employed professional, your income might not look the same every month. You might have different clients, project work, invoices, expenses, receipts and quieter periods to plan around.
Coconut helps you keep those moving parts organised.
You can track self-employment income, categorise expenses, store receipts, create invoices and keep a clearer view of what's coming in and going out.
That makes it easier to stay ready for Making Tax Digital without needing software designed for larger businesses with finance teams.
You don't need to work out Making Tax Digital for Income Tax on your own.
Coconut gives you clear steps to follow, with support available when you need a hand. So, if you're unsure about getting set up, connecting to HMRC, keeping digital records or preparing for quarterly updates, help is there.
That means you can move into MTD with more confidence, without needing to become an accounting expert.
Yes. If your qualifying income is over the MTD threshold, you'll need to keep digital records and submit quarterly updates to HMRC using compatible software.
Coconut is HMRC-recognised MTD software built for sole traders. You can connect your bank, keep your digital records organised, prepare quarterly updates and submit to HMRC from one app.
Yes. Coconut is HMRC-recognised software for Making Tax Digital for Income Tax.
That means you can use Coconut to keep digital records and send MTD updates securely to HMRC when the rules apply to you. Coconut is also built with secure bank connections, so your income, expenses and tax records can stay organised in one place.
MTD for Income Tax is being phased in by qualifying income.
It starts from 6 April 2026 if your qualifying income is over £50,000, from 6 April 2027 if it is over £30,000, and from 6 April 2028 if it is over £20,000.
Qualifying income usually means your gross self-employment income, plus property income if you have it. Coconut can help you start keeping digital records early, so you're not rushing when your start date comes around.
You can try Coconut free for 14 days, with no card details needed.
During your trial, you can see how Coconut helps you track income, sort expenses, store receipts and get ready for Making Tax Digital. Eligible new users may also be able to get Coconut free for 2 years when they sign up through Coconut, open a Zempler bank account and connect it in the app.
Coconut lets you manage both Self Assessment and Making Tax Digital.
If you're affected by MTD, you'll need to keep digital records, send quarterly updates and complete a year-end tax submission to finalise your income tax position.
If you're not in MTD, you may still need to file a Self Assessment tax return as usual.
Coconut helps keep your Self Assessment and MTD tax information connected, so you can manage the right process for your circumstances without switching between separate tools.
Quarterly updates are summaries of your income and expenses, not full tax returns.
Most sole traders using MTD for Income Tax will submit four quarterly updates each year, with deadlines on 7 August, 7 November, 7 February and 7 May.
With Coconut, your bank transactions, expenses and receipts are already organised as you go, so each update is more of a review-and-submit step than a big admin job.
Some people may be exempt from Making Tax Digital if it is not reasonably practical for them to use digital tools.
That could be because of age, disability, location, religion or another reason that makes digital record keeping difficult. If you think this applies to you, you'll need to check the rules with HMRC and apply for an exemption — check out our blog for more information on who is eligible for an exemption.
For most sole traders, Coconut gives you a simple way to keep digital records and prepare for MTD.
Yes. You can manage Making Tax Digital yourself, as long as you use compatible software and keep the right digital records.
You don't always need an accountant, especially if your tax affairs are straightforward. Coconut is built to help sole traders track income, sort expenses, store receipts and submit MTD updates to HMRC from one place, with support available if you need a hand.
For self-employed people, digital tax means keeping income and expense records digitally, then using compatible software to send updates to HMRC.
Under Making Tax Digital for Income Tax, affected sole traders will send quarterly updates during the tax year and complete a year-end tax submission after the year ends.
Coconut keeps your records, receipts, tax estimates and MTD submissions connected, so the process feels easier to manage throughout the year.
Yes. Connect your bank account securely through Open Banking and Coconut can pull your transactions in automatically, so you don’t need to type them in one by one.
From there, Coconut helps you categorise business income and expenses and keep your records organised. You can also create rules for recurring transactions, so transactions from the same merchant can be categorised automatically in future.
Coconut uses the income and expenses you’ve recorded to give you a running estimate of the Income Tax and National Insurance you may need to pay.
The estimate is based on the actual profit recorded in Coconut so far in the tax year rather than trying to predict what you’ll earn later. You can also personalise your tax profile with information such as PAYE income, property income, student loan repayments and changes to your Personal Allowance to make the estimate more useful.
It’s there to help you plan ahead rather than replace your final tax calculation.
Yes. Coconut uses income streams to help you manage more than one self-employed business in the same account.
You can create a separate income stream for each business and assign the relevant income and expenses to it, making it easier to see and report the figures for each business separately. Under MTD, separate businesses may also have their own reporting obligations, so keeping them properly organised matters.
Making Tax Digital doesn't need to mean more admin.
With Coconut, you can keep digital records, track income and expenses, see what you may owe, and submit your MTD updates to HMRC from one place.
Simple tax software. Built for sole traders and self-employed people.
