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, 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 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.
Does Making Tax Digital Apply to You?
It depends on your turnover. HMRC is rolling out MTD for Income Tax 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. 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.
What Changes in Practice?
What you do now
Keep receipts and records however you like – paper, spreadsheet, shoebox – and hand it all to your accountant once a year. 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. 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. 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
We cover these options in detail in our guide to the best MTD-compatible accounting software for UK tradespeople.
What Are the Quarterly 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 adjust. Late payment penalties and late final declarations still apply as normal.
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. 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.
How Tradify Fits In
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 the ideal time to get both sorted together – Tradify for the operational side, MTD-compatible accounting software for the tax side.
Try Tradify Free – Integrates With Your Accounting SoftwareThe Bottom Line
Making Tax Digital isn’t something to ignore or put off. If your turnover is over £50,000 it applies from April 2026. If you’re below £50,000 it’s coming 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.
Frequently Asked Questions
Making Tax Digital (MTD) is HMRC’s programme requiring self-employed people to keep digital tax records and submit quarterly income and expense summaries instead of one annual tax return. It affects you if you’re a self-employed sole trader – if your gross turnover from self-employment (before expenses) exceeded £50,000 in 2024/25, it applies from April 2026. If over £30,000 it applies from April 2027. If over £20,000 it applies from April 2028. Limited company directors are not affected by MTD for Income Tax.
The threshold for the first wave of MTD for Income Tax (April 2026) is £50,000 qualifying income. Qualifying income means gross turnover from self-employment plus any property income – calculated before deducting expenses. It is based on your most recently filed Self Assessment return (2024/25 tax year). Turnover of £50,001 or more puts you in the first wave even if your profit after expenses is much lower.
You need HMRC-recognised accounting software – you cannot submit MTD quarterly updates through HMRC’s basic online portal. Main options for tradespeople: Xero (from £16/month), QuickBooks (from £10/month), FreeAgent (free with NatWest/RBS/Mettle business account, or from £14.50/month), and Sage Accounting (from £12/month). Each connects to your bank account and can submit quarterly updates directly to HMRC. If you already use spreadsheets, bridging software like VitalTax can link them to HMRC, but dedicated accounting software is the cleaner long-term solution.
For the 2026/27 tax year (first wave): quarterly update 1 due 7 August 2026; update 2 due 7 November 2026; update 3 due 7 February 2027; update 4 due 7 May 2027. The final declaration (replacing the old Self Assessment return) is due 31 January 2028. HMRC has confirmed a soft landing for the first year meaning no penalty points for late quarterly updates in 2026/27, though late payment and late final declaration penalties still apply.
No. The payment deadline remains 31 January each year – MTD changes how you report income and expenses to HMRC throughout the year but does not change when the tax is actually due. The quarterly updates give HMRC a running view of your position but you still calculate and pay your final tax liability through the end-of-year final declaration process, with payment due by 31 January as before.
If MTD applies to you and you don’t comply, HMRC will start accumulating penalty points against you under their late submission rules once the 2026/27 soft landing period ends. Points accumulate and convert into financial penalties – the same system used for late VAT returns. Additionally, paper-based or spreadsheet-only record-keeping is no longer compliant for the MTD cohort; HMRC requires digital records maintained throughout the year rather than reconstructed retrospectively at year end.
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