Quick answer
Since basis period reform, sole traders are taxed on the profits of each tax year, whatever their accounting date. MTD quarterly updates follow tax-year periods too. Transition profits from the change don’t count towards your MTD qualifying income.
Key facts
Profits are taxed on a tax-year basis
Quarterly updates follow tax-year or calendar periods
Transition profits don’t count towards qualifying income
An accounting date of 31 March or 5 April keeps things simplest
What changed
Sole traders used to be taxed on the accounts ending in the tax year. Now profits are taxed for the tax year itself. Businesses with other accounting dates may have transition profits, which are spread over several tax years.
How it fits with MTD
MTD quarterly updates follow tax-year periods, or calendar quarters if you choose them. If your accounts end on 31 March or 5 April, your records line up with both. See standard vs calendar quarters.
Transition profits
HMRC excludes transition profits when working out your qualifying income, so they won’t push you over the MTD threshold.