Digital Record Keeping for UK Sole Traders

For millions of UK sole traders, the "shoe-box" method of accounting — saving receipts until January and then spending a weekend entering them into a spreadsheet — is coming to an end.

What is MTD for Sole Traders?

Making Tax Digital for Income Tax requires you to keep digital records of your business transactions and use compatible software to send quarterly updates to HMRC. It applies to individuals, partnerships, and trusts with qualifying income from self-employment and property.

Does it apply to me?

If you are a sole trader with gross business turnover above the thresholds, you are in scope. The thresholds are based on your combined qualifying income from all self-employments and UK property businesses.

• More than £50,000: Starts April 2026.
• More than £30,000: Starts April 2027.

What counts as a digital record?

A digital record is a record of a transaction captured in a functional compatible software program. This includes:

• The amount of the transaction.
• The date of the transaction.
• The category of the transaction (e.g., travel expenses, office costs).

You don't necessarily have to scan every receipt, but you must record the data digitally. However, keeping digital copies of receipts (like photos) is a best practice that makes your records much easier to verify.

The Benefits of Digital Records

While the change may seem daunting, moving to a digital workflow has significant benefits for your business:

1. Real-time visibility: You know how much tax you owe throughout the year, not just at the end.
2. Fewer errors: Digital tools can help catch missing data or categorisation mistakes as you go.
3. Better organisation: Your financial records are in one place, making it easier to see your actual profitability.

KiTax is built specifically for sole traders who want a simple way to keep digital records without the complexity of traditional accounting software.

*Direct submission to HMRC is not currently available via KiTax. KiTax is a record-keeping and preparation tool.*

Source: GOV.UK - Making Tax Digital for sole traders