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Sole traders urged to comply with HMRC's new income reporting rules
New rules have come into place changing how sole traders – including beauty, hair and aesthetics professionals – record and report income and expenses.
Implemented by HM Revenue & Customs (HMRC), the new Making Tax Digital (MTD) for Income Tax rules means from 6th April 2026 those affected will need to keep digital records of income and expenses for the tax year that runs from 6th April 2026-5th April 2027.
Using MTD‑compatible software, they will be required to send four quarterly updates to HMRC summarising income and costs, followed by a final tax return, rather than using the traditional online Self Assessment form. For most people, the first reporting period runs from 6th April to 5th July 2026, with the first quarterly update due by 7th August 2026.
Subsequent quarterly updates should be submitted by 7th November ‘26, 7th February '27 and 7th May ‘27, with a Self Assessment Tax Return due to be submitted via your chosen software by 31st January 2028.
Does this affect you?
You'll need to join MTD for Income Tax from April 2026 if:
- You are self‑employed and
- Your combined turnover from self‑employment and/or property exceeded £50,000 in the 2024–25 tax year
HMRC says most affected taxpayers will receive a letter confirming they must join, with links to official guidance.
Dan Tomlinson, Exchequer Secretary to the Treasury, says:
“Making Tax Digital for Income Tax is the biggest modernisation of the tax system for a generation.
"It will help customers stay on top of their finances throughout the year, reducing last minute pressure and making the annual Self Assessment process quicker and easier to complete. Free software options are available to support those in scope.”
What to do now
- Check whether you're in scope: Review your turnover for the 2024–25 tax year to see if you crossed the £50,000 threshold.
- Speak to your accountant or bookkeeper: If you use a tax agent, they can help you choose software and get set up correctly.
- Choose MTD‑compatible software: If you're managing your accounts yourself, there are free options available for simpler businesses, alongside paid packages offering features such as invoicing, expense tracking and VAT support.
- Start keeping digital records: Income from treatments, retail sales, tips and chair rental, as well as expenses like products, rent, training and insurance, will all need to be recorded digitally.
Penalties
To help businesses adjust, HMRC has confirmed there will be no penalties for late quarterly updates during the 2026–27 tax year. A new points‑based system means a £200 fine only applies after four missed submissions, so the occasional slip‑up won't immediately trigger a penalty. However, points will still apply for late annual tax returns, so deadlines remain important.
Your Self Assessment Tax Return for 2025/26, and any income tax due, should be submitted as usual by 31st January 2027.
HM Revenue & Customs (HMRC):
gov.uk
