Making Tax Digital for tradespeople: what to do now in 2026

If you only read one section, read this one. The rest of the page explains the reasoning behind each step.

• ▸Confirm you're actually in scope: qualifying income over £50,000 for 2024/25, registered for Self Assessment, no exemption applying. See "Check whether you're actually in the first group" below.
• ▸If you haven't sent the 6 April to 5 July update yet, bring your digital records for that period up to date and send it. There's no penalty for lateness this tax year, but you still need it sent before you can file your tax return.
• ▸Set a reminder for 7 November 2026, the next deadline, covering 6 April to 5 October.
• ▸Confirm your software is explicitly built for MTD for Income Tax, not just MTD for VAT.
• ▸Pick one fixed weekly slot to reconcile receipts and bank transactions, so a quarter never becomes a backlog.

The £50,000 threshold is qualifying income, not taxable profit. Qualifying income is your total turnover from self-employment and property combined, before you deduct any expenses. HMRC works this out from the Self Assessment tax return you submitted for 2024/25. A tradesperson who invoiced £58,000 and made £22,000 profit after materials, tools, van costs and other expenses is still over the £50,000 line, because the threshold looks at turnover, not what's left after costs.

Being over the threshold is necessary but not on its own sufficient. You also need to already be registered for Self Assessment with a tax return already submitted, and get your income from self-employment or property (or both), and none of the exemptions covered in the Exemptions section below need to apply to you. Don't assume you're in scope purely because your turnover clears £50,000; check the exemption categories too before you act.

This is about Income Tax only, and only for sole traders and landlords. It does not apply to limited companies, which pay Corporation Tax under separate rules. If you trade through a limited company, MTD for Income Tax as described on this page is not about you. Partnerships don't currently need to use it either, but that's not a permanent exclusion the way it is for limited companies: HMRC has said partnerships will be brought in later and will set out a timeline at a later date.

The threshold steps down over the next two years. If you're currently under £50,000 but above one of the lines below, MTD is coming for you on that later date, and it's worth planning for now rather than at the last minute.

The first standard quarterly update, covering 6 April to 5 July 2026, was due on 7 August 2026. If you're in the first mandatory group and haven't sent it, HMRC has confirmed there are no penalties for missing a quarterly update deadline for the 2026/27 tax year. That is a stated, time-limited position for this tax year specifically, not a permanent rule and not something to rely on for future quarters.

That grace period covers quarterly updates only. It does not cover your annual Self Assessment tax return or any tax payment. Both of those keep their normal penalty regimes and normal deadlines. Sending quarterly updates late this year will not by itself trigger a penalty; failing to file your tax return or pay what you owe on time still can.

The practical fix is the same either way: get your digital income and expense records for 6 April to 5 July up to date in MTD-compatible software, send that overdue update as soon as you can, and make sure you're set up to hit 7 November on time. You cannot submit your tax return until your quarterly updates for the year are in, so leaving this longer just narrows your run-up to the 31 January tax return deadline.

The grace period is for the 2026/27 tax year only. From the 2027/28 tax year, a points-based penalty system starts: each missed quarterly update or tax return deadline earns one penalty point, and reaching 4 points triggers a £200 penalty, with a further £200 for every subsequent late submission while you're at the threshold. Building the habit now, while there's no penalty, is cheaper than building it once points start accumulating.

A quarterly update is not a line-by-line breakdown HMRC inspects. It contains totals for each income and expense category you've used, built from your digital records for that period. HMRC does not receive your individual receipts or invoices as part of the update; those stay in your own records unless HMRC separately asks to see them.

The categories are the same income and expense categories already used in Self Assessment, just reported four times a year instead of once. If your bookkeeping already sorts transactions this way, most of the work is already done, and a quarterly update becomes a five-minute check your software generates rather than a fresh task.

You now need to keep digital records of your business income and expenses in MTD-compatible software, rather than reconstructing them once a year from a shoebox of paperwork. The hard requirement is about timing, not about the moment you record something: your digital records for a quarterly period must exist before you send that quarter's update, or before its deadline if you haven't sent it, whichever comes first. HMRC's own recommendation, not a legal requirement, is to record each transaction as close to the date it happened as you reasonably can, because that keeps your view of the business current, not because the software forces real-time entry.

Each quarterly update is cumulative. It covers the whole tax year to date, not just that quarter in isolation, so an error you spot after sending an update usually gets folded into your next update automatically, without resubmitting anything. The fourth and final update of the year works differently: if you find an error, need to add joint property income you missed earlier, or decide after the year ends to claim Rent-a-Room relief, you resend the fourth update itself, before making any tax adjustments. There's no fifth update for it to roll into, so this is the one case where you do go back and resubmit.

You can still use an accountant or agent. Many agents will run the quarterly updates on your behalf using their own MTD-compatible software, the same way many already handle VAT returns. MTD changes the format and frequency of reporting, not who's allowed to do it for you.

None of this changes what counts as a business expense, only how and when you record it. The categories are the same ones you already use for Self Assessment.

• ▸Materials and stock: keep the supplier receipt or invoice, whether it's a merchant-counter paper slip or a card payment logged on site.
• ▸Van and fuel: keep fuel receipts and mileage records if you claim simplified mileage rates rather than actual vehicle costs, and don't mix the two methods for the same vehicle in one tax year.
• ▸Tools and equipment: keep purchase receipts. A significant tool or piece of kit may count as capital expenditure rather than a straightforward expense, which changes how you claim for it, so check with your accountant if a purchase is a large one.
• ▸Job invoices: keep a digital copy of every invoice you raise, whether or not it's been paid yet. When that income actually counts towards your MTD totals depends on your accounting method: most sole traders now default to cash basis, where income is recorded when you're actually paid, not when you invoice. Traditional accounting recognises income earlier, by invoice or accrual, with adjustments made in your software for amounts invoiced but not yet received.
• ▸Subcontractor payments and CIS: if you pay subcontractors under the Construction Industry Scheme, or you're a subcontractor having CIS deducted, keep digital records of the gross amount, the CIS deduction and the net payment separately. MTD doesn't change how CIS itself works, only how your totals reach HMRC.
• ▸Receipts collected on site: a phone photo taken at the point of purchase, filed into your software's app, counts as a digital record. It doesn't need re-entering from a paper copy later, provided the software captures what a paper receipt would.

There is more than one workable pattern here. What matters is that records stay current enough that a quarterly update is a five-minute check, not a scramble.

• ▸Capture each receipt or material cost when it happens, or at a fixed end-of-day slot. Photograph it in the software's app before it goes through the wash in your work trousers.
• ▸Reconcile bank, card and expenses weekly, ideally the same evening every week, so a quarter never turns into three months of backlog at once.
• ▸Check for missing documents or uncategorised transactions monthly. Most MTD software flags these, and clearing them monthly is far faster than clearing them quarterly.
• ▸Review the quarterly update before the deadline rather than on it, so there's time to chase a missing invoice or ask your accountant a question.
• ▸If you use an agent, agree explicitly who submits what and by when. Quarterly updates are easy to assume the other person is handling.

These are the standard calendar quarters. HMRC-approved software may offer calendar-quarter alternatives in some cases; check your software's own dates if it isn't using the standard periods above.

HMRC keeps a list of recognised software and is explicit that it does not recommend any particular product or provider. Free options exist for simple tax affairs but often carry transaction limits, so check those limits against how many transactions you actually record before assuming a free tier will cover you all year. This page does not rank or recommend specific software.

• ▸Does it explicitly support Making Tax Digital for Income Tax, not just MTD for VAT?
• ▸Does it cover every income source you have, including self-employment and property if both apply to you?
• ▸If you pay or are paid under CIS, does it handle CIS deductions alongside MTD reporting, or will you be tracking those separately?
• ▸If you're VAT-registered, is the same product (or a compatible pair) able to handle both VAT and Income Tax MTD?
• ▸Does it support multiple agents, if you use more than one adviser?
• ▸What does it cost once any free tier's transaction limit is exceeded, and what happens to your records if you stop paying?

If you already use an accountant or bookkeeper, MTD is a good reason for a short conversation now rather than in January.

• ▸Who is actually sending my quarterly updates, me or you, and how will I know each one has gone in?
• ▸What do you need from me, and by when, to hit each quarterly deadline comfortably rather than at the last minute?
• ▸If I'm on CIS, how are my deductions being reconciled against what I actually owe?
• ▸What happens if I change software, or change accountant, partway through a tax year?
• ▸Based on my circumstances, is there an exemption I should be applying for rather than working through this?

Some exemptions are automatic, for example qualifying income at or below the relevant threshold, not having a National Insurance number, or specific roles such as non-resident companies, trusts and personal representatives. Others require you to apply, most notably the digital-exclusion exemption, for anyone who genuinely cannot reasonably use compatible software or send digital updates because of age, disability, location or another reason.

This page cannot tell you whether you qualify. Check the official exemption pages linked below and apply if you think one applies to you. Don't assume and don't guess.