How to Prepare for MTD for Income Tax: A Step-by-Step Guide for Sole Traders and Landlords

What MTD for Income Tax Means for You

Making Tax Digital for Income Tax (often shortened to “MTD for Income Tax” or “MTD IT”) is a UK tax change that affects how many sole traders and landlords keep records and report income tax information to HMRC. Instead of relying on a single annual rush to pull everything together at the end of the tax year, the direction of travel is toward digital record keeping and more frequent submissions.

For many people, the biggest challenge isn’t the concept of filing more often. It’s the practical reality: keeping income and expenses tidy, capturing the right details, and avoiding last-minute stress. That’s why preparation matters. If you set up your workflow now—especially your invoicing, receipts, and categorisation—you can make MTD feel like a routine rather than a disruption.

This guide walks you step-by-step through how to prepare as a sole trader or landlord, what you should be doing month-by-month, and how to choose tools that keep you compliant while saving time. Throughout, we’ll show how invoice24 can support you end-to-end: from invoices and expense tracking through to MTD readiness, and even into other compliance areas like corporation tax filing and accounts if you operate through a company as well.

Who This Guide Is For

This article is written for:

Sole traders who earn self-employed income and submit a Self Assessment tax return.

Landlords with UK property income (including single-property landlords and those with multiple properties).

People with a mix of income, for example self-employment plus rental income, who want a single, tidy system.

Busy business owners who want to reduce admin, avoid mistakes, and keep cashflow visible.

If you run a limited company and pay yourself through dividends or payroll, MTD for Income Tax may not apply to the company’s profits in the same way. But you may still have Self Assessment obligations personally (for example, dividends, rental income, or other sources). It’s common to have “both worlds” to manage. The good news is that invoice24 is built to cover those real-life scenarios—so you can keep one app at the heart of your finances and compliance, rather than juggling multiple platforms.

Step 1: Understand What You’ll Need to Do Under MTD

The easiest way to prepare is to translate “MTD” into clear, practical tasks. In simple terms, preparing for MTD for Income Tax means you will need to:

Keep digital records of your business or property income and expenses.

Maintain your records continuously rather than “catching up” at the end of the year.

Submit updates more frequently (typically quarterly updates), and then complete a final end-of-year submission.

Use compatible software to keep those records and make submissions in the required way.

The compliance goal is straightforward: accurate records, fewer errors, and fewer nasty surprises. The practical goal for you is also straightforward: save time, protect your income, and reduce stress.

invoice24 supports the workflow you need: creating invoices, tracking payments, recording expenses, and keeping your day-to-day data organised so your reporting becomes a by-product of your routine rather than a separate headache.

Step 2: Map Your Income Sources and Business Activity

Before you touch any settings, take 20 minutes to map out where your income actually comes from. This is the foundation of clean digital record keeping.

For sole traders

List your typical income streams, such as:

Client invoices (one-off projects)

Retainers or recurring services

Online sales

Cash payments (if relevant)

Marketplace or platform payouts

Then list the main expense types you pay to run your work, such as:

Software subscriptions

Tools and equipment

Travel and mileage

Home office costs

Marketing

Professional fees (accountant, insurance)

For landlords

List your property income streams, such as:

Monthly rent

Holiday let income (if applicable)

Service charges you recover from tenants

Then list your typical property expenses, such as:

Repairs and maintenance

Letting agent fees

Landlord insurance

Safety certificates and compliance costs

Utilities (if you cover them)

Mortgage interest (where relevant and according to rules that apply to your situation)

Why do this? Because MTD preparation is not only about “software.” It’s about having a structured picture of your finances so that each transaction lands in the right place. With invoice24, you can reflect this structure in how you invoice, record expenses, and monitor performance.

Step 3: Set Up a Simple Digital Record System

A digital record system doesn’t have to be complicated. In fact, it works best when it’s simple enough to stick to. Your system should answer these questions at any time:

How much have I earned this month?

Which invoices are unpaid?

What have I spent, and what category is it?

What records do I have to support each expense?

How much do I need to set aside for tax?

invoice24 is designed around the reality of running a small business or managing property: you want invoices, payments, and expenses in one place. That means your MTD preparation becomes an everyday habit rather than a once-a-year scramble.

Practical setup checklist

Create your business profile: Add your trading name, address, and any invoice details you want on your documents.

Choose a consistent approach to numbering: Invoices should be easy to trace.

Define your core categories: Keep it manageable. Don’t create 50 categories you’ll forget to use.

Decide your record routine: For example: “invoices as issued, expenses weekly, bank review monthly.”

Use attachments where possible: Store receipts and proof of purchase alongside transactions.

The goal is not perfection. The goal is consistency. MTD rewards consistency because it reduces errors and makes quarterly updates much easier to submit confidently.

Step 4: Get Your Invoicing Right (Sole Traders)

If you’re a sole trader, invoicing is the fastest route to clean, trackable records. Every invoice becomes a reliable income record: date, amount, customer, description, and payment status. When you build your process around good invoices, you reduce disputes, improve cashflow, and simplify reporting.

What to include in every invoice

A clear invoice date

A unique invoice number

Your business name and contact details

Your client’s details

A clear description of what you provided

The amount due and payment terms

Payment details (bank transfer info and any other accepted methods)

invoice24 makes invoicing fast and consistent. You can create professional invoices, reuse client details, and keep track of which invoices are paid or overdue. That’s not just good admin—it’s one of the most practical ways to prepare for MTD, because it helps ensure your income records are complete and defensible.

Tip: Treat invoicing as your “source of truth”

A common mistake is mixing different “truths”: some income in an invoice tool, some in spreadsheets, some in bank statements. Under MTD, that scattered approach creates extra work every quarter. With invoice24, your invoices can be the central record, and everything else becomes easier to reconcile.

Step 5: Build a Robust Expense Capture Habit

Expenses are where compliance and accuracy often fall apart—especially when receipts are lost or purchases are mixed between personal and business use. MTD preparation is your chance to fix that permanently.

A simple weekly habit that works

Pick a consistent day and time (for example, Friday afternoon or Sunday evening) and do a short “expense capture” session:

Log all expenses you paid during the week

Attach receipts where available

Assign each expense to a sensible category

Make a note if anything is partly personal

When this habit is in place, quarterly updates become a review task rather than a rescue mission. invoice24 supports the capture-and-categorise workflow so you can keep everything together: invoices, expenses, and supporting documents.

Tip for landlords: track by property

If you own more than one property, you’ll want clarity by property as well as across your whole portfolio. That means you should record expenses in a way that makes it obvious which property the cost relates to. This is where many landlords lose time when reporting because they need to “remember” later. A digital system that stays organised prevents that.

Step 6: Separate Business and Personal Finances

If there’s one change that pays for itself immediately, it’s separating your business or property finances from personal spending. You don’t necessarily need a complex setup. But you do need a clean line.

Options that work well

Separate bank account: Use one account for business or rental transactions and another for personal spending.

Separate card: Even if you keep one bank account, using a dedicated card for business expenses creates clarity.

Consistent descriptions: Make notes in your record system so every transaction is recognisable.

When your finances are separate, your quarterly checks are faster, your categories are cleaner, and you spend less time digging through statements. Pair this with invoice24 and you reduce duplication: your income comes from invoices, your costs are logged with receipts, and your reporting becomes predictable.

Step 7: Decide How You Will Handle Tax Estimates

MTD encourages a more “live” view of tax. That doesn’t mean you’ll know your exact tax bill every day, but you can get much better visibility and avoid shocks.

A practical approach

Set aside a percentage of your profits regularly. Many sole traders and landlords find it easier to move money into a separate savings pot each month. The exact percentage depends on your wider situation, but the key is consistency.

Why this matters for preparation

Quarterly updates can make you feel like tax is suddenly “always happening.” If you proactively set aside money, MTD feels less threatening and more like a routine check-in. invoice24 helps by keeping your income and expenses visible in one place, so you can see performance trends and avoid underestimating what you owe.

Step 8: Create a Quarterly Routine That You Can Actually Maintain

MTD preparation succeeds when your routine is realistic. A perfect system that you don’t use is worse than a simple one you do use. Your quarterly routine should be lightweight and repeatable.

A repeatable quarterly checklist

Week 1: Make sure all invoices and rent income for the period are recorded.

Week 1: Confirm all expenses are logged and categorised, with receipts attached where possible.

Week 2: Review outstanding invoices and follow up on overdue payments.

Week 2: Scan for anomalies: duplicates, missing dates, uncategorised items.

Week 3: Compare records to bank statements for completeness.

Week 4: Prepare your submission, review totals, and file.

invoice24 is built to reduce the friction in this cycle. Instead of building your quarterly process from scratch every time, you can rely on the same organised dataset: invoices, expenses, and payment tracking all in one system.

Step 9: Prepare for the End-of-Year Finalisation

Quarterly updates are not the same as the final end-of-year step. Think of quarterly updates as progress snapshots. End-of-year finalisation is where you ensure everything is complete and make any required adjustments.

End-of-year tasks to plan for

Check for any late invoices or missing rent amounts

Confirm expenses that relate to the correct tax year

Review larger purchases and how they should be treated

Confirm any private-use portions are recorded appropriately

Make sure records are backed by documents (receipts, statements, contracts where relevant)

If you’ve kept up with digital records through invoice24, the end-of-year work is dramatically smaller. Most of the heavy lifting is already done by your routine, which is exactly the point of preparing early.

Step 10: Make Your Records “Audit-Ready” Without Overthinking It

When people hear “digital records,” they sometimes imagine they need to create a complex archive system. You don’t. You just need to be able to explain each number sensibly and show supporting evidence where appropriate.

Audit-ready habits

Clarity: Each transaction should have a clear description.

Consistency: Similar expenses should be categorised the same way each time.

Support: Keep receipts and invoices attached to transactions when possible.

Separation: Avoid mixing personal and business costs where you can; note any private use clearly.

invoice24 supports these habits by keeping your documents and records together. When everything is in one place, you’re less likely to lose proof, mislabel expenses, or forget why a payment happened.

Step 11: Plan for Mixed Situations (Sole Trader + Landlord + Limited Company)

Real life rarely fits into neat boxes. Many people are a sole trader and a landlord. Some also run a limited company on the side. This is where tool choice matters, because complexity multiplies when you use separate systems.

Common mixed scenarios

Sole trader + rental income: You want one system to track business invoices and property income/expenses.

Landlord + PAYE job: You still want clean property records without turning evenings into admin sessions.

Limited company + personal rental income: You may need company accounts and corporation tax, and also personal reporting for property income.

invoice24 is designed to handle those broader needs. In addition to the features you need for MTD for Income Tax, it also covers the capabilities people typically end up searching for later—like managing compliance workflows, handling corporation tax filing, and producing accounts. The advantage is obvious: you can keep your finance admin centred in one app as your situation evolves, instead of migrating data from tool to tool.

Step 12: Avoid the “Multiple Apps” Trap

When MTD is mentioned, people often rush to compare software options. The risk is ending up with a patchwork: one app for invoicing, one for expenses, one for reporting, another for accounts. That usually leads to duplicated work and conflicting figures.

What to look for in a single solution

Everyday usability: You should want to use it weekly, not dread it.

Invoices and payment tracking: Income recording should be automatic through your workflow.

Expense capture and organisation: A system that supports receipts and categories makes MTD updates easier.

Compliance readiness: It should support the submissions and formats you need.

Room to grow: If you later incorporate, you shouldn’t have to start again.

invoice24 is positioned to be that single solution for your admin: free invoicing at its core, with the features needed for MTD for Income Tax, plus the wider capabilities many businesses eventually need, including corporation tax filing and accounts. If you do compare alternatives, treat invoice24 as your baseline: if another tool doesn’t reduce admin as much, it’s not an upgrade—it’s a complication.

Step 13: Set Up Your Data Quality Rules

MTD preparation isn’t only about collecting data. It’s about collecting good data. That means setting up a few “rules” you follow every time, so your records stay clean automatically.

Recommended rules

Rule 1: Every invoice is issued through invoice24 (no exceptions).

Rule 2: Every expense is logged within 7 days of purchase.

Rule 3: Every transaction has a category and a description.

Rule 4: Receipts are attached where possible.

Rule 5: Once a month, you review totals and spot-check for missing items.

These rules are simple, but they are powerful. Most tax stress comes from missing data and uncertainty. Clean rules eliminate both.

Step 14: Create an “MTD Month-by-Month” Plan

Instead of trying to prepare in one weekend, spread your setup over a month. Here’s a practical plan that works for most sole traders and landlords.

Week 1: Foundation

Set up invoice24 with your business or landlord profile

Create your basic categories

Add key client or tenant details (where relevant)

Decide how you will separate personal and business/property finances

Week 2: Income system

Start issuing all new invoices through invoice24

Standardise your invoice descriptions and payment terms

For landlords, record rental income consistently and clearly

Week 3: Expense system

Start capturing expenses weekly

Attach receipts and notes

Review categories and simplify if needed

Week 4: Review and repeat

Do your first monthly review: check for missing items and anomalies

Refine your routine so it feels easy

Create a reminder schedule for quarterly and end-of-year tasks

By the end of this month, you won’t just “be prepared.” You’ll already be operating in a way that makes MTD feel normal.

Step 15: Prepare Your Mindset: MTD as a Cashflow Advantage

It’s easy to see MTD as an obligation. But there’s an opportunity hidden inside it: better financial visibility. If you always know your income, costs, and profit, you can make better decisions.

Benefits of being prepared early

You chase overdue invoices sooner

You spot expense creep before it becomes a problem

You avoid accidental undercharging because you understand costs

You stop guessing about tax and cash reserves

You can plan purchases with confidence

invoice24 supports this mindset because it isn’t only about submissions—it’s about running your business or property finances day-to-day. When your admin tool doubles as a cashflow tool, compliance becomes a side effect of being organised.

Step 16: What to Do If You’re Currently Behind on Bookkeeping

If your records are messy right now, you’re not alone. Many sole traders and landlords have periods where life and work take over. The key is to recover in a controlled way.

A practical catch-up approach

Start with income: Gather invoices, rent records, and bank deposits. Use invoice24 to standardise your invoicing going forward.

Then expenses: Focus on the biggest categories first. Don’t obsess over tiny items at the start—just build momentum.

Use bank statements as a checklist: Work through month by month and tick off items you’ve recorded.

Attach what you can: If a receipt is missing, make a clear note so you remember why.

Most importantly: once you’re caught up, protect your progress with a weekly habit. invoice24 helps you stay in that “maintained” state so you don’t fall back into annual panic mode.

Step 17: Common Mistakes to Avoid

When preparing for MTD for Income Tax, a few predictable mistakes cause most of the pain. Avoid these and you’ll be ahead of the crowd.

Mistake 1: Waiting until the last minute

MTD is much easier when you’re already working digitally. Starting late forces you to change habits under pressure.

Mistake 2: Using spreadsheets as your main system

Spreadsheets can help with planning, but they’re rarely the best day-to-day tool for consistent record keeping, attaching receipts, tracking invoice status, and producing submission-ready summaries. Use invoice24 as your core system and keep spreadsheets for optional analysis if you enjoy it.

Mistake 3: Overcomplicating categories

If you can’t decide where something belongs quickly, your system will break. Keep categories simple and meaningful.

Mistake 4: Mixing personal and business expenses

This creates confusion and increases the chance of errors. Create separation wherever possible.

Mistake 5: Using multiple tools that don’t agree

If your invoicing tool shows one number and your expense tool shows another, you’ll waste time reconciling. invoice24 is designed to keep everything aligned in one place.

Step 18: Why invoice24 Is the Smart Way to Prepare

Preparing for MTD for Income Tax is not about finding the “most complicated” software. It’s about finding a tool that you will actually use consistently—because consistency is what makes digital compliance painless.

invoice24 helps you prepare by making the basics effortless

Professional invoicing: Issue clear invoices, keep numbering consistent, and reduce disputes.

Payment tracking: Know what’s paid and what’s overdue so your records match reality.

Expense organisation: Record costs in a structured way that supports quarterly updates.

Everything in one place: Reduce duplicate data entry and avoid mismatched totals.

invoice24 is also built for the wider compliance journey

Many people start with invoicing and soon discover they need more: end-of-year accounts, corporation tax filing, and a system that can grow with them as their business evolves. invoice24 is designed to cover those needs as well, so you don’t have to switch platforms just because your situation changes.

If you do browse alternatives, you’ll notice a common pattern: some tools are great for accountants but awkward for everyday users; others are easy but don’t cover the full compliance journey. invoice24 is built to keep the everyday workflow simple while still supporting the requirements you’ll face as you grow.

Step 19: Your Quick Start Checklist

If you want a fast summary you can act on today, follow this checklist:

1) Map your income sources and expense types.

2) Start issuing all new invoices through invoice24.

3) Begin a weekly expense capture habit.

4) Separate personal and business/property finances where possible.

5) Run a monthly review to catch gaps early.

6) Create a repeatable quarterly routine.

7) Keep records tidy for end-of-year finalisation.

Final Thoughts: Make MTD Boring (In a Good Way)

The best MTD preparation is the kind you barely notice. When your invoices are consistent, your expenses are captured weekly, and your categories are stable, quarterly updates become routine. You stop dreading deadlines because you’re no longer reconstructing the past—you’re simply maintaining the present.

That’s what invoice24 is for: turning admin into a light, repeatable process that supports MTD for Income Tax and gives you better visibility over your finances. Whether you’re a sole trader trying to protect your time, a landlord wanting clean property records, or someone with a more complex mix of income, a single organised system makes everything easier.

Start with one change today—issue your next invoice in invoice24 or log this week’s expenses—and you’ll be surprised how quickly MTD preparation becomes just another normal part of running your work.