Four things have changed for the self-employed in quick succession: the cash basis became the standard method, Class 2 stopped being charged, the tax year basis replaced accounting-date apportionment, and Making Tax Digital arrived on 6 April 2026 for those with qualifying income over £50,000. Each has a date attached, and the MTD dates run to 2028.
Making Tax Digital: who and when
This is the change with the longest tail, and the thresholds step down over three years. You are in scope if you are registered for Self Assessment as a sole trader or landlord, receive self-employment or property income, and your qualifying income exceeds the relevant threshold.
- £50,000 — measured on the 2024 to 2025 return, mandatory from 6 April 2026;
- £30,000 — measured on the 2025 to 2026 return, mandatory from 6 April 2027;
- £20,000 — measured on the 2026 to 2027 return, mandatory from 6 April 2028.
The mechanism catches people out. HMRC reviews your Self Assessment return and checks your qualifying income each tax year, so the return you file for a given year determines whether you are mandated roughly twelve months later. The 2026 to 2027 return you are keeping records for now is the one that decides whether April 2028 applies to you.
Qualifying income is gross income from self-employment and property, not profit. A landlord with £25,000 of rent and £18,000 of mortgage interest has qualifying income of £25,000, not £7,000 — which is why the £20,000 threshold reaches much further than people expect. Our guide to MTD for sole traders covers the quarterly mechanics.
The cash basis is now the standard
HMRC's own description is unambiguous: "Cash basis accounting is the standard way to record your income and expenses if you're a sole trader or partnership without corporate partners." You record income and expenses when money moves, rather than by invoice date.
Traditional accruals accounting is still available, but it is now the thing you choose rather than the default. Limited companies cannot use the cash basis at all, and some other businesses are excluded.
The judgement is straightforward once you know it is a choice. The cash basis suits businesses paid promptly, holding little stock and giving little credit — most service businesses and most landlords. Accruals accounting suits businesses carrying stock, giving real credit terms or wanting accounts that a lender or buyer will recognise, because a cash-basis profit figure can be a poor description of a trading year.
A business that drifted onto the cash basis by default because nobody made an election should check that the default is actually the right answer for it.
Class 2 and Class 4 National Insurance
For 2026 to 2027 the position is:
- Class 2. No longer charged. Where profits reach the small profits threshold of £7,105, Class 2 contributions are treated as having been paid to protect your National Insurance record;
- Voluntary Class 2. Available at £3.65 a week, which matters for anyone below the threshold who wants to preserve a qualifying year;
- Class 4. 6% on profits from £12,570 to £50,270, and 2% above £50,270.
The voluntary rate is the point worth acting on. Someone with low or loss-making self-employment gets nothing automatically, and £3.65 a week to secure a qualifying year towards the state pension is among the best-value payments in the tax system. It is also easy to miss, because nothing prompts you.
The tax year basis
Profits are now assessed by reference to the tax year rather than to the accounting period ending in it. For a business with a 31 March or 5 April year end, nothing changed. For a business with, say, a 30 June year end, profits must be apportioned across two sets of accounts to arrive at the figure for the tax year.
That has two consequences. Where the later accounts are not finalised in time, a provisional figure is used and the return amended once actual figures are available — which turns one filing into two. And many businesses responded by changing their accounting date to 31 March, which is usually the right call for a small business but is a real decision with transitional consequences, not a formality.
Payments on account
Unchanged, and still the single most common cash flow shock in a first profitable year. Where the liability exceeds the threshold, two payments on account for the following year are due on 31 January and 31 July, each at half the prior year's liability. In the January after a first strong year, a balancing payment and the first payment on account fall on the same date.
Payments on account can be reduced where income has genuinely fallen, but reducing them on optimism rather than evidence produces an underpayment carrying interest — currently 7.75%. Our guide to HMRC interest rates sets out what that costs.
What to do
Check which MTD threshold catches you and in which year, working from the return that will measure it rather than from today's income. Decide the cash basis question deliberately rather than accepting the default. Check whether a voluntary Class 2 payment is worth making. And if your accounting date is not 31 March or 5 April, ask whether the apportionment is still worth the trouble.
Acumon works with sole traders and landlords through self assessment, Making Tax Digital and cloud accounting support, with accounting for sole traders and landlord accounting alongside. If your income is near £20,000, April 2028 applies to you and the record-keeping starts before then.