Do I need a business bank account for Making Tax Digital?

No. GOV.UK says a sole trader might use a personal or business bank account, as checked on 16 October 2026. Making Tax Digital, which covers qualifying income over £30,000 from 6 April 2027, needs accurate records, not an account type.

Making Tax Digital for Income Tax (MTD) is about records and reporting. You keep a digital record of each sale and business cost, and send HMRC a quarterly update from compatible software. Nothing in the GOV.UK guidance or in the Income Tax (Digital Obligations) Regulations 2026 tells a sole trader to open a business bank account.

What the rules do say

GOV.UK's page on business records sets two tests. Your records must be accurate, and you must be able to identify business transactions. It then says you might be able to use a personal or business bank account for your business, and to check with your bank which type you can use for business transactions. So the type of account is a matter for your bank, not for HMRC.

MTD adds the digital part. Each record needs the amount, the date and a category, made in software that works with MTD. If your software pulls in your bank feed, GOV.UK says you may need to add details such as the category, that some transactions may not appear in full, and that it is your responsibility to check the records are accurate before each update.

Why a separate account helps

A bank feed brings in everything on the account. If the van fuel, the merchant's invoice and the customer's payment share an account with the weekly shop and the gym, every transaction has to be sorted into business or personal before an update goes. A separate account for the trade does most of that sorting for you.

There is a CIS reason too. To get gross payment status, so contractors pay you in full without deductions, HMRC's tests include that your business is run through a bank account. GOV.UK's wording is "a bank account", not a business account, but a clean one makes the record easier to show.

Mixed accounts and digital records

If you keep one account for everything, MTD still works. You just do more sorting.

For a bill that is part business and part personal, GOV.UK gives three choices. You can record only the business share, record the full amount and the personal share, or record the full amount and reduce the category total before your tax return. Its example is a £200 phone bill with £125 of business calls and £75 of personal calls, so £125 is the business share.

Cash jobs need care in either set-up, because they do not appear in any feed.

What this means for you

You do not need to switch banks for MTD, and opening a business account is your choice. If your trade income goes through your personal account, your records still need to show each business transaction, so the real cost is time spent sorting. If you stay with a personal account, check your bank's terms allow business use, as GOV.UK suggests. Whichever you choose, keep statements as proof: GOV.UK says you must keep supporting records, such as bank statements and invoices, as you do now.

Steps to sort your banking before MTD

1. Check whether MTD applies to you and from when. Over £50,000 of qualifying income on your 2024-25 return meant 6 April 2026; over £30,000 on your 2025-26 return means 6 April 2027.
2. Ask your bank whether your current account may be used for business transactions.
3. Decide whether to move the trade to its own account. If you do, move customer payments and regular costs before 6 April.
4. Connect the account to MTD-compatible software, and check every transaction has a category.
5. Enter cash jobs and anything the feed misses, before each update.
6. Before each update, check that no personal spending has crept in.

The free MTD check shows your start date, and the trades section has more on keeping the books for a trade.