What is happening?
HMRC recently rolled out Making Tax Digital (MTD) for sole traders. MTD was previously introduced for limited companies in 2016.
MTD mandates that tax returns are filed electronically with HMRC, replacing the previous methods of paper form submissions.
What does this mean for you?
If you are operating a limited company, you will already be compliant with MTD and filing your returns electronically.
For Sole Traders, if your income is over £50,000 per annum, you will need to get ready for MTD in April 2026 and ensure you are able to file your returns electronically to HMRC.
The income thresholds will change over time:
April 2026: Income over £50,000.
April 2027: Income over £30,000.
April 2028: Income over £20,000.
As a sole trader you are required to file a self assessment tax return, if you have not previously registered to do so, you can do it at the online here.
Once registered you will create a Government Gateway ID, this will be your login to submit your assessment.
How does SmartPay and the Exchange support MTD?
As a digital platform, SmartPay is compliant with MTD and creates electronic records of your finances.
To help you with MTD returns you can export your invoice and accounts receivable data out of SmartPay, this can then be entered into your tax filing partner (such as Xero, QuickBooks, or Sage) required format and submitted as your digital tax return.
How to export data from SmartPay
Once you are logged in, head to the SmartPay page, and then to Accounts Receivable. From here select Statements in the top bar as shown below.
From the Statements page you can then select the Statement type and date filter
Once you have selected the Statement type, Date filter and the From and To dates you click Generate to get your statement export.
Statement files
When you Generate your statements you will download a zip file containing 3 CSVs + a README.txt
The read me file contains info on what the files contain and how to use them:
MTD_Income_YYYYMMDD_YYYYMMDD.csv
This file contains all your income transactions for the selected period. Each row is one line item on an invoice. You will see the following types of entries:
INVOICE — a standard invoice raised on the platform
SUPPLEMENTARY_INVOICE — an additional charge linked to an existing invoice (e.g. waiting time, ULEZ)
CREDIT_NOTE — a credit issued against a previous invoice; amounts will appear as negative values
What to do: Import this file into your bridging or accounting software as your digital income record for MTD for Income Tax.
MTD_Expenses_YYYYMMDD_YYYYMMDD.csv
This file contains the early payment fees charged to your account during the selected period. Each invoice that was factored through SmartPay generates two lines — one for the early payment fee and one for the processing fee. All lines are grouped under a single monthly fee invoice issued by Transport Exchange Group.
What to do: Import this file into your bridging or accounting software alongside the income file as your digital expenses record for MTD for Income Tax.
MTD_Metadata_YYYYMMDD_YYYYMMDD.txt
This file is a summary of the export. It shows who the export belongs to, the date range and filter used, and the totals for both the income and expenses files.
What to do: You do not need to import this file into your software. Use it to verify the export is complete and the totals match what you expect before submitting to HMRC.
What to do with the statement once exported?
Once your statements are generated you can use them with your HMRC compliant software.
The process will vary slightly depending on what filing software you use.
In general you will import your CSV file, then in your accounting software you would select the headings for each column of your data to match the required data in your accounting software.
Please note TEG is unable to provide specific guidance on using your tax software, we advise that you contact your software provide or consult their help documentation.