What Is Making Tax Digital for UK Tradespeople?

If you're a self-employed tradesperson and you haven't heard of Making Tax Digital yet, now is the time to pay attention. From 6 April 2026, HMRC has started rolling out the biggest change to the UK tax system in over 30 years — and if your annual turnover is above £50,000, it already applies to you.

The good news is it's not as complicated as it sounds. This guide explains what Making Tax Digital actually is, whether it affects you right now, what you need to do, and what happens if you ignore it.

What Is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's programme to modernise how tax gets reported in the UK. Instead of completing one Self Assessment tax return at the end of the year, you'll keep digital records throughout the year and send HMRC short quarterly updates summarising your income and expenses — then complete a final declaration at year end.

Think of it less like four tax returns and more like keeping your books updated regularly and pressing send four times a year. The quarterly updates are lightweight summaries, not full tax calculations. As long as you're keeping your records up to date in compatible software, it takes a few minutes per quarter.

Making Tax Digital has already been in place for VAT since 2022 — if your business is VAT registered you've been doing a version of this for years. MTD for Income Tax is the next phase, and it now applies to sole traders.

Does Making Tax Digital Apply to You?

It depends on your turnover. HMRC is rolling MTD for Income Tax out in phases based on qualifying income — your gross turnover from self-employment and any property income combined, before expenses:

• From 6 April 2026 — Sole traders with qualifying income over £50,000
• From April 2027 — Sole traders with qualifying income over £30,000
• From April 2028 — Sole traders with qualifying income over £20,000

Your qualifying income is based on your 2024/25 Self Assessment return — the most recently filed one. If your gross turnover from self-employment exceeded £50,000 in that tax year, MTD applies to you from 6 April 2026. That's now.

Note that qualifying income is turnover — revenue before you deduct expenses — not profit. A plumber turning over £60,000 but taking home £35,000 after costs is still in the first wave.

Limited companies are not affected by MTD for Income Tax — they fall under a separate Making Tax Digital for Corporation Tax programme with its own timeline. If you run a limited company, this doesn't apply yet.

What Changes in Practice?

The core change is moving from annual record-keeping to ongoing digital record-keeping. Here's what's different:

What you do now

Keep receipts and records however you like — paper, spreadsheet, shoebox — and hand it all to your accountant once a year in January. They compile it and submit your Self Assessment return by 31 January.

What you do under MTD

Keep digital records in HMRC-compatible software throughout the year. Submit four quarterly updates to HMRC summarising your income and expenses. Then submit a final declaration by 31 January confirming your overall tax position for the year.

A self-employed plumber we spoke to who switched to MTD-compatible software described the shift this way: "I was dreading it but it's actually made things easier. I take a photo of every receipt on my phone, the software logs it automatically, and at the end of each quarter my accountant just reviews and presses send. January is no longer a panic."

The quarterly updates don't change when you pay tax — you still pay by 31 January as normal. They just give HMRC a running view of your business throughout the year instead of a once-a-year snapshot.

What Software Do You Need?

You cannot submit MTD quarterly updates through HMRC's basic online portal — you need compatible software. HMRC maintains a list of recognised platforms on GOV.UK.

The main options for tradespeople are:

• Xero — most widely used by UK accountants, strong bank feed integration, handles CIS, scales well as the business grows. From £16/month.
• QuickBooks — good mobile app for receipt capture on the go, solid for straightforward sole trades. From £10/month for the sole trader plan.
• FreeAgent — popular with contractors and sole traders, clean interface, excellent UK tax focus. Free for NatWest, RBS, and Mettle business account holders. From £14.50/month otherwise.
• Sage Accounting — established UK provider, integrates with Sage Payroll if you have staff. From £12/month.

If you currently use spreadsheets and don't want to change your record-keeping approach entirely, bridging software like VitalTax or MyTaxDigital can link your spreadsheet to HMRC — but full accounting software is generally the cleaner long-term solution.

We cover these options in detail in our guide to the best MTD-compatible accounting software for UK tradespeople.

What Are the Deadlines?

If you're in the first wave (income over £50,000), your key dates are:

• 6 April 2026 — MTD for Income Tax begins. Digital record-keeping required from this date.
• 7 August 2026 — First quarterly update due (covering 6 April to 5 July 2026)
• 7 November 2026 — Second quarterly update due
• 7 February 2027 — Third quarterly update due
• 7 May 2027 — Fourth quarterly update due
• 31 January 2028 — Final declaration due for 2026/27 tax year

HMRC has confirmed there will be no penalty points for late quarterly updates during the first year (2026/27) — a soft landing period while people get used to the new system. Late payment penalties and late final declarations still apply as normal, so don't take this as permission to ignore it entirely.

What If You Don't Do Anything?

If MTD applies to you and you continue submitting an annual Self Assessment return instead of quarterly updates, you'll start accumulating penalty points under HMRC's late submission rules once the soft landing period ends. Points build up and convert into financial penalties — the same system already used for late VAT returns.

Beyond penalties, paper-based or spreadsheet-only record-keeping will no longer be compliant for the MTD cohort. HMRC requires digital records maintained throughout the year — not reconstructed at year end.

The one in three sole traders who still haven't prepared as of early 2026 are storing up a compliance problem. The earlier you sort it, the less disruptive it is.

Does MTD Affect Your Tradify Setup?

Tradify handles your job management, quoting, and invoicing — and the invoices and job costs you generate in Tradify flow directly into your accounting software via integration. That means your MTD record-keeping is already being fed by your day-to-day trade work, without double entry.

If you're not using job management software yet, now is actually the ideal time to get both sorted together — Tradify for the operational side, MTD-compatible accounting software for the tax side. They work as a pair.

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The Bottom Line

Making Tax Digital isn't something to ignore or put off. If your turnover is over £50,000 it applies to you from April 2026 — that's now. If you're below £50,000 it's coming for you in 2027 or 2028.

The practical steps are straightforward: choose an HMRC-compatible accounting package, connect it to your bank account, start keeping digital records, and submit quarterly updates. Most tradespeople who've made the switch find it less of a burden than the annual January scramble — because the work is spread across the year instead of hitting all at once.

Read our next guide on the best MTD-compatible accounting software for UK tradespeople to find the right tool for your business, and our step-by-step guide on how to prepare for Making Tax Digital if you need to get set up quickly.

Affiliate disclosure: Some links on this page are affiliate links. If you sign up through them we may earn a commission at no extra cost to you. We only recommend tools we'd genuinely point a tradesperson towards.