Making Tax Digital looming for sole traders and freelancers: How to stay compliant

As UK Postbox provides virtual office addresses and mail management services for sole traders, we’d like to update on important upcoming changes to income tax self assessment.

From 6 April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) will be introduced. MTD will apply to sole traders whose combined gross income from self-employment exceeds £50,000 a year.

As a sole trader you need to stay compliant, organised and maintain professionalism, whether that’s through registering a virtual office address, or HMRC filing.

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC’s initiative to create a fully digital tax system. For sole traders and freelancers, this means:

• Keeping digital records of income and expenses.
• Submitting quarterly updates using HMRC-approved software.
• Continuing to file an annual tax return, now with more accurate data.

The goal is to reduce errors, streamline reporting, and make tax compliance simpler. That’s provided you prepare in advance!

Who does Making Tax Digital (MTD) affect?

If you’re a sole trader and/or landlord with a qualifying income of more than £50,000 for the 2024/25 tax year, you’ll need to comply with MTD from 6 April 2026. The threshold falls to £30,000 from April 2027, and then to £20,000 in April 2028.

MTD has already been introduced for VAT-registered businesses. These firms will have a headstart when complying with MTD IT rules – but it will be a major change for other sole traders and landlords.

The Making Tax Digital thresholds will change in coming years. In summary:

• Threshold from April 2026: £50,000
• Threshold from April 2027: £30,000
• Threshold from April 2028: £20,000

What software is available?

Like with many parts of running a business or freelance career, you’ll need to set up dedicated software to manage your digital tax self-assessment. 

There are different types of software to help you use Making Tax Digital for Income Tax. You can get software that either:

• creates digital records
• connects to your existing records, such as those held in spreadsheets

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What are the best Make Tax Digital-compliant software packages?

The following can automate reporting and integrate with your bank:

• QuickBooks
• Xero
• FreeAgent 

Note, that QuickBooks (via Zapier) and Xero (via Make) integrate with UK Postbox to add scanned mail as new bills, saving valuable time. 

How should sole traders and freelancers prepare?

Here’s how to stay ahead:

1. Check your income – Know whether you meet the MTD thresholds.
2. Digitize your records – Keep invoices, receipts, and expense logs in digital format.
3. Register with HMRC – Sign up online before your first quarterly submission is due.
4. Schedule quarterly updates – Set reminders to submit your income and expenses every three months.

How can UK Postbox support sole traders and freelancers?

A virtual office can benefit sole traders and freelancers in many ways. We’ve listed some of the common benefits we’ve heard from our customers using the service:
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• Look professional - Choosing a virtual office in a prestigious location, such as London, can help your image when dealing with customers and other companies.
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• Access business mail from anywhere - Online mail management technology means you’ll always have access to your mail across all of your devices. You can access your mail online, whether working from home or out onsite. We've made UK Postbox as convenient as accessing your email and instant messaging (WhatsApp) on the go!
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• Protect your home location - Using a virtual office address in place of your home location protects your real address from being shared publicly.
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• One address for the future of your company - By choosing one of our business street addresses, you instantly give your brand more credibility while protecting your personal details. It also means you’re future-proofing your business. If you later decide to register as a UK Limited company, you’ll be able to keep the same address. No need to update your website, invoices, business cards, or stationery – saving you time, hassle, and costs. For sole traders looking to grow, having a stable, professional address in place now makes life much easier down the road.
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• Save on costs - Virtual offices offer a much more affordable solution compared to physical office space. If you do not need to visit a location in-person, they’ll still offer you everything you need at a much lower cost.
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• Access mail management features - Online mail management features mean you’ll always have access to the functionality you need to handle all of your business mail remotely, no matter where you are in the world.
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• Integrate with cloud platforms -  If you’re using cloud storage solutions such as Evernote, Dropbox, Google Drive or Microsoft OneDrive, integrate your virtual mail and access your post in your existing storage areas.
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• Go paperless - Sending mail to your virtual office means that you won’t have to store, manage and shred physical mail yourself.
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• Access mail instantly - If you regularly move between different locations, you may experience delays in accessing your mail. Virtual offices help to remove this and help you to access your mail as it arrives.

What next?

Alongside your preparations for Making Tax Digital, why not set up your virtual office address with UK Postbox? Stay compliant, stay professional, and stay ahead.