Bookkeeping for Self Employed Sole Traders
Preparing For The Changes
Making Tax Digital For Income Tax
If you’re self employed, you’ll be used to keeping track of your income and expenses to complete your end of year self assessment.
Currently, this is only done once a year by the end of January and any tax due is then calculated and paid.
From the tax year 2024-2025, there are big changes happening regarding record keeping for sole traders.
This is a new initiative from HMRC called Making Tax Digital for Income Tax (MTD for IT).
Q: What is MTD for IT and how will it affect me?
MTD for IT is a new system for recording and reporting income and expenses digitally for sole traders and landlords.
The timeline for these changes is currently, as follows:
From April 2026, it will become a legal requirement for certain sole traders and landlords to use compatible software to record income and expenses and to make quarterly reports of these to HMRC via the software.
The changes are being implemented in stages so anyone earning over £50,000 in the 2024-5 tax year, will be required to start the process in April 2026.
The next stage is anyone earning over £30,000 and this will be mandated from April 2027.
The third stage was announced in the Spring statement 2025 and will be mandated from April 2028 for all those earning over £20,000.
Q: What will I need to report?
Each quarter, there will be a submission to HMRC of all income and expenses which will be recorded and submitted via compatible software.
This will be a huge change for many self employed traders, who may not currently use software to record their transactions.
There will still be an end of year self assessment which will be a summary of the annual information and the usual tax calculation will also be done at this time.
Q: What do I need to do to prepare?
Even if you’re not immediately affected, the changes are coming!
It would be advisable to make steps towards recording transactions using software, if you’re not already doing that.
There are both free and paid versions of accounting software with various advantages and disadvantages, so do a bit of research and decide on your budget.
Consider whether you want to do the bookkeeping yourself or you’d like to employ someone to do it, so that you can focus on your main business.
Most software will allow you to upload receipts etc so start by trying this out then you don’t need to keep paper copies of all your expenses.
Q: What help can a bookkeeper offer with this?
Totality Bookkeeping already works with several sole traders to help them to record their daily transactions.
We feel that MTD for IT should be viewed as a positive step forward in bookkeeping for the Self Employed.
Recording income and expenses digitally may have been on your “too difficult to do” pile, but will have many benefits for your business progression, incuding a greater understanding of your financial data and situation.
There are two services which we will be offering to help sole traders as MTD for IT is implemented.
Option One
The first service is for sole traders who are happy to do their own bookkeeping but would like a bit of help to set up.
This will be a morning or afternoon tutorial at a one-off cost of £100 which will consist of setting up the software and ensuring that you’re confident with using this going forward for your bookkeeping.
Option Two
The second service is to complete the bookkeeping and eventually the quarterly reporting for you. This service starts at £50 per month (for a minimum of 12 months), depending on the number of transactions which need recording each month. This doesn’t include the cost of the software but we can advise you of some of the costs and features of some of the different packages we would recommend.
If you’d like us to help you with one of the above services, please complete the form below and we’ll be in touch!