To digitally maintain and submit to HMRC

Pressures of cost, comfort in existing methods and the potential hell of implementing accounting software for not just you, but a whole team of people along with perceived complexity and expected learning curve, … or perhaps you have volume trade, one-off projects or short-term work/jobs, therefore producing infrequent sales and invoicing… and for small traders and business owners, data privacy concerns, fear of errors… and of course, your accountant uses it, not you…

So, why bother with accounting software? Particularly with a low turnover, or infrequent sales.

If you’re a landlord or sole trader

The UK Government will be rolling out Making Tax Digital (MTD) for sole traders and landlords in April 2026, and if you fall within the threshold, this will require you to maintain a digital record of your transactions, such as invoices and receipts, as well as information about VAT.

The UK Government, MTD, you and your Accountant

While your accountant will file MTD-compliant returns through MTD compliant software on your behalf, the responsibility for maintaining digital records of transactions (including invoices, receipts, and VAT details) rests with you, the business owner. And it will be you that will receive any fines.

Ultimately, the responsibility is with the business owner to maintain their financial records and supporting paperwork…

Who will MTD apply to?

• VAT registered businesses – since 2022
• Income Tax for self-employed individuals
• Landlords

MTD requirements:

• to keep records digitally
• provide digital quarterly updates
• be able to provide their ITSA return information to HMRC through MTD compatible software

MTD is being launched over the next 3 years based on income before expenses

• From 6 April 2026: For those with qualifying income over £50,000
  in the 2024 to 2025 tax year.
• From 6 April 2027: For those with qualifying income over £30,000
  in the 2025 to 2026 tax year.
• From 6 April 2028: For those with qualifying income over £20,000
  in the 2026 to 2027 tax year.

Should the above apply to you, then you need to get some accounting software. It can be a basic free version but check what each provider says about GDPR and data protection as it could mean that you need to register with the ICO. Always check, it is free to do so and is quite simple and quick to run through. It’s better than a fine.
Visit the ICO website

What does GOV.UK say?

“The new MTD for ITSA regulations require a relevant person to keep and preserve their tax records electronically and to submit reports to HMRC using approved software. A report of the business’s trading or property income, allowable expenditure and claims for allowances or reliefs against such income must be submitted in relation to each tax year. Interim cumulative reports must be submitted quarterly on fixed dates that are set out in the regulations.”

Source: Gov.uk

In a Nutshell, plus examples

VAT:

Under the UK’s MTD for VAT rules, businesses must use MTD-compatible software if their taxable turnover in any rolling 12-month period is above the VAT threshold, which as of 2024 is £90,000. This threshold is set to remain at £90,000 until at least March 31, 2026.

Deregistration Threshold: A business can apply to cancel its VAT registration if its turnover falls below £90,000.

If your turnover is below this threshold, you are not required to use MTD software to file VAT returns. Your accountant will though.

Scenario: Jointly Owned Property

• You and your partner jointly own a rental property
• Total annual rent: £36,000
• Your share: £18,000
• No self-employment income
• Does MTD apply?

Does MTD apply? ❌ No.  You only count your share, and it is below £50,000.

Scenario: Sole Trader with high turnover but low profit

• Gross turnover: £70,000
• Profit after expenses: only £18,000 (doesn’t matter!)

Does MTD apply? ✔️ Yes. The threshold is based on gross income, not profit.

Scenario: Sole Trader + Landlord (combined income counts!)
Sole-trader gross turnover: £28,000

• Rental income (gross): £26,000
• Combined qualifying income: £54,000

Does MTD apply? ✔️ Yes. Because the combined income exceeds £50,000, you enter MTD ITSA from April 2026.

Scenario: Landlord ONLY

• You own two rental properties
• Gross rental income: £32,000 per year (before expenses)
• No self-employment income

Does MTD apply?❌ No. Your qualifying income is under £50,000.

Scenario: Sole Trader ONLY

• You run a small business as a sole trader
• Gross turnover: £42,000 per year
• No rental income

Does MTD apply? ❌ No. You are below the £50,000 qualifying-income threshold

Final Thoughts

For a sole trader with only a few sales per month, or property owner with regular income, you don’t need a complex or expensive fully paid accounting software unless you plan to scale.

Ridgell & Guildway Accountants Ltd recommend QuickBooks Ledger. One key benefit is that you can pick and choose which transactions to add to your books and which to ignore or exclude, which is ideal if, as a small trader, you dont have a business bank account and use a personal bank account.

Speak with us  to find out if it would be a suitable fit for your needs.

In the new year we will be posting an article covering some of the options available based on simplicity, cost, and HMRC compliance.