If you’re used to doing one tax return a year, sending it off, and not thinking about it again until twelve months later, things are about to look very different. Because the £50k rule and Making Tax Digital are just around the corner.

From 6 April 2026, sole traders with turnover over £50,000 must follow new digital reporting rules. This sits under Making Tax Digital for Income Tax. Say goodbye to paper records (including the receipts bundled at the back of your glove box) and spreadsheets. And say hello to more regular reporting to HMRC.

And before you switch off because you don’t make “£50k profit”, let’s clear something up… This is about turnover, not profit.

It’s Turnover, Not Profit

If you invoice £50,000 over the year, you’re in. This is what might catch some sole traders out. You might feel like you are just ticking along, maybe only making a few grand once everything is paid. But if your sales go over £50,000, the new rules apply.

And remember, turnover includes everything you invoice for. That is not just your labour, it is also materials. If you are sourcing kitchens, boilers, timber, tiles, or electrical parts and passing those costs on to your customer, they all count towards your turnover figure. So even if your actual profit is modest because materials eat up a big chunk of the job, your total invoiced amount could still push you over the £50,000 threshold.

And from April 2027, the threshold drops to £30,000. So, even more sole traders will be brought into the system.

No More ‘Once a Year’ Tax Return

Under the new rules, if you are over the threshold, you must now:

• Keep digital accounting records.
• Use approved software
• Send four quarterly updates to HMRC.
• Submit a final digital declaration.

The quarterly updates are not tax returns. They do not calculate your final tax bill. They are simply progress reports, a snapshot of your income and expenses for that quarter.

It’s at the end of the tax year that you’ll submit your final declaration. This replaces your current Self-Assessment. This is where you confirm your figures, include any other income if needed, make adjustments, and finalise your tax position.

Only at this point will you or your bookkeeper calculate your actual tax bill.

HMRC’s aim is to reduce errors from paper records, cut down mistakes from spreadsheets, and spread reporting across the year instead of everything landing at once. Whether you (or we) agree with it, this new reporting system will be a legal requirement very soon.

Plan Properly to Streamline Admin & Costs

Let’s be straight about it. For many of you, this will mean extra costs.

A standard Self-Assessment might have cost between £150 and £500, depending on how involved it was and who prepared it.

Now you need software before you have even looked at support. Thankfully, Xero’s Simple plan is relatively reasonable, currently £7 plus VAT per month.

But, if you want a bookkeeper or accountant to manage the records, submit the quarterly updates, and complete the final declaration, you are realistically looking at somewhere between £600 and £2000 per year, depending on complexity, and how much of the work you’re willing to do yourself.

If you are only making a few thousand pounds profit, that is a significant chunk. Which is why you should take the time to think about the best way to set yourself up for these changes.

If your systems are still paper-based or spreadsheet-heavy, now is the time to change that. The sooner you get used to digital records and regular bookkeeping, the easier the quarterly updates become.

Tradermate Support Packages Coming Soon

Here at Tradermate, we are putting together some support packages for sole traders. We intend to offer three levels of support:

• A package for those who want to do their own bookkeeping, with professional setup and support. This is best for people who are happy to raise invoices and record expenses. But want someone to oversee the setup and submission of progress reports.
• A package for those who are happy to handle most of the admin but want regular professional involvement. This is best for people who are comfortable with basics but don’t want to worry about accuracy or reconciliations. Or for traders who want a deeper understanding of their business with quarterly reviews.
• Finally, there will also be a package for those who want everything handled for them. A perfect solution if you would rather focus on your business than bookkeeping.

We’ll be sharing more information about each of these soon!

The Time to Act Is Now

The new rules are almost here, and if your turnover is over £50,000, they will apply to you from April 2026. Don’t wait until your first quarterly deadline is looming to figure it out.

If you are unsure whether you are over the threshold, or you want to talk through the best way to handle it, get in touch. We can explain it clearly, look at your numbers, and help you choose the level of support that fits how you run your business.