What Making Tax Digital actually means for sole traders?
Making Tax Digital (MTD) is coming, and with it, a lot of noise.
I keep hearing the same comments from sole traders:
“Does this mean four tax returns a year?”
“Do I need an accountant now?”
“Is this going to make tax even more complicated?”
Short answer: no.
Longer answer: my partner, Coconut is helping us cut through the myths so you know exactly what’s changing, and what isn’t.
Important note: This article is written specifically for sole traders.
If you’re running a limited company or a more complex business, the setup you need will be different, contact me and I can help you figure that out.
Myth 1: MTD means I need to submit a tax return every three months
Not true.
You will need to submit quarterly updates, but these are not full tax returns. They’re simple snapshots of your income and expenses during the year.
You’ll still submit one final tax return annually, just with far fewer surprises along the way.
Myth 2: I need to hire an accountant
You don’t have to.
HMRC has designed MTD for Income Tax Self Assessment (ITSA) so sole traders can file themselves. You’ll need to understand what’s required, but hiring an accountant isn’t mandatory.
Some people will still choose to use one for peace of mind — that’s a personal decision, not a requirement.
Myth 3: I have to use complicated accounting software
Absolutely not.
The best software is the one that:
Is easy to use
Fits how you actually work
Reduces admin instead of adding to it
HMRC provides a list of MTD-recognised software, so you’re not guessing. Simple, purpose-built tools beat bloated systems every time.
Myth 4: I can still use spreadsheets
Spreadsheets alone won’t be compliant.
MTD requires digital records, which means spreadsheets by themselves don’t meet the rules unless you use approved bridging software. You also can’t copy and paste entries between systems.
If you’re spreadsheet-only right now, this is your cue to rethink your setup.
Myth 5: MTD will make taxes harder
It might feel daunting at first — but the intention is the opposite.
MTD is designed to:
Spread admin across the year
Reduce last-minute stress
Make tax more predictable
Quarterly updates mean smaller, manageable check-ins instead of one big annual scramble.
Myth 6: Quarterly updates will be time-consuming
Not if you’re set up properly.
With the right tool, quarterly updates should actually save time overall — and make the final submission faster and more accurate.
Less panic. More control.
Myth 7: MTD won’t apply to landlords
It does.
Landlords earning over the threshold must comply in the same way as sole traders. If a property is jointly owned, it’s your share of the rental income that counts toward the threshold — not the full amount.
This one catches people out, so it’s worth checking early.
Myth 8: I can ignore MTD until it starts
You can… but I wouldn’t.
Leaving big changes until the last minute is a guaranteed way to create unnecessary stress. Getting set up early gives you time to adjust your process without pressure.
Future you will thank you.
Myth 9: MTD is just about compliance
Compliance is part of it — but it’s not the whole point.
MTD is also designed to help you:
Understand your finances in real time
Reduce tax shocks
Keep better records
Avoid penalties
Make more informed decisions
Used properly, it’s a clarity tool — not just a reporting obligation.
Myth 10: I won’t need an app for this
You’ll need approved software, full stop.
That software needs to:
Keep digital records
Categorise income and expenses
Submit quarterly updates
Support your final tax return
Choosing something with a solid app just makes all of this easier — especially if you’re running your business on the move.
The truth about Making Tax Digital
MTD doesn’t have to be scary.
But you do need the right setup. A setup that helps you to make running your business feel calmer, clearer, and more in control,which is exactly how we should always aim to feel, tax or otherwise.
Why I recommend Coconut (for sole traders)
I want to be very clear about this.
Coconut is not the right tool for every business, and I don’t recommend one-size-fits-all systems.
Most of my clients aren’t sole traders. They’re limited companies, growing teams, or businesses with more complex reporting needs. For those businesses, I recommend very different setups.
But for sole traders, Coconut is one of the cleanest and simplest options available.
If you’re running your business solo and want:
A straightforward way to stay MTD-compliant
Clear visibility on what you’re earning and what tax to set aside
Something you’ll actually keep up to date with
Coconut does exactly what it needs to, without the overwhelm.
It removes the need for clunky spreadsheets, manual tracking, and “I’ll sort it later” admin. Everything lives in one place and supports how sole traders actually work day to day.
That’s why it’s the tool I use personally, and recommend when someone says:
“I’m making it up “once a year” (DO NOT DO THIS!)
If you’re not a sole trader — or you’re unsure what setup is right for your business — that’s a different conversation. And it’s one I’m very happy to have with you.
About Coconut
Coconut is a finance app built specifically for sole traders.
It helps you:
Track income
Log expenses
Stay on top of Self Assessment and MTD
Understand what tax to set aside — without spreadsheets or paperwork
Whether you’re on site, on the move, or juggling business around life, Coconut keeps things clear and manageable.
Less faff. More graft.
👉 Try Coconut (for sole traders)
Start your free 30-day trial here:
👉 Self employed accounting software | !Coconut
You can also use these exclusive discounts:
Monthly plans: 15% off your first 3 months
Code: STWRTM15Annual plans: 15% off
Code: STWRTA15
Not a sole trader?
Or not sure what accounting setup you need?
👉 Come and talk to me — I’ll help you choose the right system for your business.