For many sole traders, the move from manual spreadsheets to digital accounting is one of the biggest changes brought about by Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA). From April 2026 onwards, certain income thresholds require quarterly reporting and a final declaration via MTD-compliant software. Fortunately, several free MTD software for sole traders options make this transition simpler and more affordable.
The first step in moving from spreadsheets is preparing existing records. Sole traders should review their income and expense data, ensuring all transactions are accurately categorised. Cleaning up historical data makes importing into MTD software far easier and reduces errors during quarterly submissions. Without this preparation, important transactions may be missed, which could lead to compliance issues.
Once records are prepared, choosing the right software is critical. Free MTD software for sole traders typically offers bank integration, automated categorisation of income and expenses, and basic reporting tools. Selecting software that matches the business’s complexity ensures that records are compliant with HMRC standards and that the final declaration can be submitted without issues.
The next stage is migration. Many free tools allow CSV imports from spreadsheets or direct bank feeds, which reduces manual data entry and speeds up the transition. Sole traders should cross-check imported data carefully, reconciling it against their previous records to ensure nothing is missing. Even small errors can lead to discrepancies in quarterly updates, so attention to detail is essential.
After migration, adopting a regular workflow is key. Sole traders should update their digital records continuously, entering new transactions promptly and categorising them correctly. The software’s reporting features can then be used to monitor financial performance and prepare for the MTD quarterly updates and final declaration.
Finally, familiarisation and training are essential. While free MTD software is generally user-friendly, understanding HMRC reporting requirements ensures that sole traders remain compliant. Taking time to learn how to generate reports, reconcile accounts, and submit declarations digitally prevents errors and streamlines the new reporting process.
Switching from spreadsheets to free MTD software for sole traders may seem daunting, but with careful preparation, the right software choice, and a consistent workflow, compliance with MTD for ITSA becomes manageable. Digital record-keeping not only satisfies HMRC’s requirements but also provides a clearer picture of the business’s financial health, enabling smarter decisions for growth and sustainability.
