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Set up MTD for IT in QuickBooks as a sole trader

by Intuit•17• Updated 1 week ago

Starting 6 April 2026, if you are a sole trader with a total qualifying income over £50,000, you will need to follow the HMRC Making Tax Digital for Income Tax (MTD for IT) rules. This means moving away from the annual Self Assessment return to a system of digital record-keeping and quarterly updates.

This guide is for sole traders—those whose qualifying income comes from a single business. We’ll show you how to use QuickBooks to automate your record-keeping and meet HMRC requirements.

Note: For a broader overview of the HMRC mandate, eligibility thresholds, and how these changes affect your business, visit our Making Tax Digital hub page.

How it works

Before you start, make sure you have registered for Self Assessment with HMRC and signed up for MTD for IT. If you haven't done this yet, follow our Set up Making Tax Digital for Income Tax in QuickBooks guide first.

Before you can start reporting, you must ensure your business type is correctly configured in QuickBooks. 

  1. Select the Settings ⚙ icon and choose Account and settings.
  2. Go to the Company  tab.
  3. In the Legal info section, select Business type.
  4. Choose Sole Trader from the list and select Save.

Under MTD for IT, HMRC requires an "unbroken digital chain" from your transactions to your submissions. This means you can’t manually type totals into a spreadsheet at the end of the year.

  • Connect your bank: Link your business bank account to QuickBooks. This automatically pulls in your transactions so you can categorise them with a click.
  • Snap your receipts: Use the QuickBooks mobile app to take photos of your receipts. QuickBooks extracts the data and matches it to your bank transactions.
  • Real-time tracking: Because you are recording transactions as they happen, you’ll always see a real-time Tax Estimate in your dashboard.

Instead of one big tax return, you will send four short "updates" throughout the year. These are not full tax returns; they are simply summaries of your digital records.

  1. Go to All apps from the left-hand menu and select Income Tax (Take me there).
  2. Select View & Submit Obligations.
  3. Check your income and expenses for the period.
  4. Select Submit update.

Important deadlines

For most sole traders, the quarterly dates follow the tax year. Each update is due by the 7th of the month following the end of the quarter:

  • Quarter 1 (6 Apr – 5 Jul): Due 7 August
  • Quarter 2 (6 Jul – 5 Oct): Due 7 November
  • Quarter 3 (6 Oct – 5 Jan): Due 7 February
  • Quarter 4 (6 Jan – 5 Apr): Due 7 May

Things to know

  • Qualifying income: The £50,000 threshold is based on your gross qualifying income (total turnover before expenses), not your profit.
  • HMRC soft landing: For the first year (April 2026 to April 2027), HMRC has confirmed they will not apply penalty points for late quarterly updates as you adjust to the new system.
  • Annual tax return: You still need to complete your annual tax return by 31 January each year to finalise your tax bill and report non-business income.

Ready to get MTD-ready?

Don't wait for the mandation date. QuickBooks Online and Sole Trader Plus is designed specifically to handle these new HMRC requirements with AI-powered tools that do the heavy lifting for you.

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