Your trade, filed with HMRC under Making Tax Digital.
Keep the records HMRC asks for as you go, and file your quarterly updates, annual submission and final declaration from one place. The ledger is free all year. You pay only when a new quarterly update goes to HMRC.
HMRC-recognised
Every sole trade
No monthly subscription
How self-employment works under MTD
Making Tax Digital for Income Tax has applied since 6 April 2026 if your qualifying income is over £50,000. That is your turnover before expenses, added to any rent you receive. The threshold falls to £30,000 in April 2027 and £20,000 in April 2028.
Each trade you run is its own business for HMRC. You keep digital records for it, send a quarterly update of the year so far, then an annual submission with your adjustments and allowances, and finish the year with a final declaration.
In FileThat every record you add has a category, and the category decides which box on the quarterly update it fills. Nothing is left for you to type into the update itself: you check the figures and send them.
What you can file
Quarterly updates
Turnover, other business income and each expense category, as totals for the tax year so far. Every expense box has a disallowable twin, so a private add-back reaches the quarterly update and not only the year end.
Annual submission
Capital allowances, including the annual investment allowance and the zero emissions car allowance, the £1,000 trading allowance, structures and buildings allowance, adjustments such as goods taken for your own use and balancing charges, and a Class 4 National Insurance exemption if one applies.
CIS deductions and losses
Enter each contractor statement and FileThat sends it to HMRC's Construction Industry Scheme service, so the tax already taken off counts against your bill. Loss claims can be carried forward, back or sideways.
Final declaration
Adjust HMRC's summary of your trade if you need to, check its calculation for the year with your other income in it, and make your final declaration.
Keep your figures in a spreadsheet instead? See MTD bridging software.
Getting set up
Connect and add your trade
Connect FileThat to HMRC and add your self-employment, with your National Insurance number and HMRC business ID.
Keep your records
Add income and costs as they happen, photograph receipts, raise invoices, upload a bank statement CSV, or keep a spreadsheet and upload that.
Log your business miles
Record each journey and FileThat works out the deduction at HMRC's flat mileage rates: 45p a mile for the first 10,000 miles in a car or van and 25p after that, 24p on a motorcycle, 20p on a bicycle.
File each quarter
FileThat adds up the year so far and you check the figures before anything goes to HMRC. Records you have filed are then locked.
Where your costs go
Van, fuel and travel
Motor and fuel, fares, hotels and subsistence file together as car, van and travel expenses. If you claim mileage instead, the mileage deduction fills the same box.
Costs you also use privately
Give a phone bill or a home office cost a business-use percentage and FileThat files the business share. If you prefer, a setting files the full cost with the private share in the disallowable column instead. Same taxable profit, either way.
Materials and subcontractors
Goods for resale have their own box. Payments to your own subcontractors under CIS file as construction industry payments to subcontractors, apart from your other costs.
Premises, office and the rest
Rent, utilities, business rates and insurance file as premises running costs. Phone, stationery and office costs, advertising, professional fees, bank charges and loan interest each have their own box. Anything else goes in other business expenses.
What HMRC expects you to keep: HMRC digital record keeping.
Good to know
Income counts when it is paid
Most sole traders use the cash basis, the default since April 2024. When you mark a FileThat invoice as paid it asks for the date paid, and that is the date the income record takes, so it lands in the right quarter.
VAT registered? The figures follow
Your records are entered gross. On the standard scheme FileThat files the net of recoverable VAT in your income tax figures, so blocked input tax such as business entertainment stays in the cost; on the flat rate scheme it files gross, and the flat-rate payment to HMRC is a cost. Your VAT returns come from the same records.
Expenses are itemised
Fifteen expense boxes, each filled from its own categories, plus a disallowable column. FileThat files them itemised, not as one total.
Each trade is separate
If you run two trades, or a trade and a rental, each is its own business with its own records and quarterly updates. One update and one credit covers one business for one quarter.
In the building trade? See MTD and your CIS refund.
Straight answers
Do sole traders need Making Tax Digital software?
If your qualifying income is over the threshold, yes. That is your turnover before expenses, plus any rent from UK or foreign property. The threshold is £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028. Below it you can carry on with a Self Assessment return.
Can I claim mileage instead of my van costs?
Yes. Log each business journey and FileThat works out the deduction at HMRC's flat mileage rates, 45p a mile for the first 10,000 miles in a car or van and 25p after that, and files it as a car, van and travel expense. Once you claim mileage on a vehicle you do not also claim its fuel, repairs or insurance, or capital allowances on it, and you stay with mileage for as long as you use that vehicle in your business.
My phone and my home office are part private. How do I record them?
Give the record a business-use percentage and FileThat files the business share. A £60 bill at 50% business use files as £30 if you are not VAT registered or are on the flat rate scheme. On the standard scheme the share applies to the net, so the same bill with £10 of VAT files as £25. If you would rather HMRC saw the whole figure and the add-back, a setting on your business files that figure, £60 or £50, with the private half in the disallowable column. The taxable profit is the same.
I am a CIS subcontractor. Where do my deductions go?
Enter each contractor statement: contractor name and reference, gross paid, cost of materials and the amount deducted. FileThat sends it to HMRC's Construction Industry Scheme service, and HMRC sets the tax already taken off against your bill for the year. Recording CIS deductions is free. If you have overpaid, HMRC works out the refund from your return.
I am VAT registered. What figures go to HMRC for income tax?
You enter every record gross, as it appears on the receipt or invoice. On the standard scheme FileThat files the amounts net of recoverable VAT in your quarterly update, because VAT you reclaim is neither your income nor your cost. VAT you cannot reclaim, such as on business entertainment, stays in the figure. On the flat rate scheme it files them gross and treats your flat-rate payment to HMRC as a business expense.
I run two businesses. Do I file for each one?
Yes. HMRC treats each trade as its own business, so each has its own records, its own quarterly updates and its own annual submission. Property you let is a separate business again. One credit covers one quarterly update for one business, whatever the amount of income in it.
What does it cost?
The income and expenses ledger is free all year. Each new quarterly update costs from £3.99, set by your own income, with no monthly subscription. Your annual submission, final declaration, CIS deductions, loss claims and amendments are free, and once you have paid £50 in a tax year the rest of that year is free too.
Your trade, in one place
4 free credits, no card needed. Pay per new quarterly update after that, with no monthly subscription. Your annual submission, final declaration and CIS deductions are free.
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