Making Tax Digital for Trades: 2026 Survival Guide

Making Tax Digital (MTD) for Income Tax means keeping your business records digitally and sending HMRC a quarterly update through compatible software instead of a single once-a-year Self Assessment. For trades it’s less a tax change than a habit change: you swap the shoebox of receipts and the January panic for tidy digital records and four lighter check-ins a year. It’s already live for VAT, and for Income Tax it’s phasing in from April 2026 to April 2028 based on your income. This guide lays out the timeline, who’s in each wave, what a quarterly update actually is, how to pick software, and a get-ready checklist by trade.

What MTD actually is

MTD is HMRC’s programme to move tax record-keeping and filing online. Two rules sit at its heart: you must keep your records digitally (in software, not just paper or a shoebox), and you must file to HMRC directly from compatible software rather than typing figures into an old-style return.

MTD for VAT came first and already applies to VAT-registered businesses. MTD for Income Tax Self Assessment — usually shortened to MTD for Income Tax, or MTD ITSA — is the wave now arriving for sole traders and landlords. This guide is mostly about that Income Tax wave, because that’s the one that catches the typical self-employed trade.

The 2026–2028 timeline: who’s in and when

MTD for Income Tax is being introduced in stages, and which stage you’re in depends on your qualifying income — broadly your gross income from self-employment and property before you take off expenses.

From 6 April 2026, MTD for Income Tax is mandatory for sole traders and landlords with qualifying income over £50,000.

From 6 April 2027, it extends to those with qualifying income over £30,000.

From 6 April 2028, it extends again to those with qualifying income over £20,000.

Two things trip trades up here. First, it’s gross income, not profit — a sole-trader builder turning over £60,000 and clearing £35,000 profit is in the first wave on the £60,000, not out of it on the £35,000. Second, the thresholds step down over three years, so a trade who’s comfortably under £50,000 today can be pulled in by the 2027 or 2028 drop without their turnover changing much at all. Work out which wave you’re in now, and keep an eye on it as the threshold falls.

If you’re VAT-registered you’re already living with MTD for VAT, so the record-keeping discipline won’t be new — MTD for Income Tax simply adds the quarterly Income Tax updates on top.

What a quarterly update is (and isn’t)

The phrase “quarterly filing” sounds like four tax returns a year. It isn’t. A quarterly update is a summary of your business income and expenses for the quarter, sent from your software to HMRC — a running total, not a full return with every figure finalised and every relief claimed.

Across the year you send those updates each quarter, and then a final step (a year-end declaration) is where you confirm everything, make any adjustments, claim reliefs and finalise the position — replacing the old Self Assessment return. So the rhythm becomes four light-touch updates plus one proper year-end tidy-up, instead of one big annual scramble. For a trade who keeps on top of it, each quarterly update is a matter of making sure the quarter’s invoices and expenses are in the software and hitting submit.

The practical win is that you always know roughly where you stand on tax, because the numbers are current rather than reconstructed in January. The practical cost is that you can’t ignore the books for eleven months any more — which, for most trades, turns out to be a good thing forced on them.

Choosing MTD software

You must use MTD-compatible software — HMRC keeps a list of products that qualify. For most trades the choice is between a full bookkeeping package and a lighter app, and the right pick depends on how complex your books are.

If you already use accounting software, check it’s MTD for Income Tax compatible and, if so, you may have very little to change. If you’re still on spreadsheets or paper, you have two routes: move to a proper bookkeeping app, or keep a digital spreadsheet and use “bridging software” that files from it. The full-app route is usually less fiddly long term because it handles the record-keeping and the filing in one place, links to your bank, and lets you photograph receipts on site.

When you compare products, weigh a few things that matter to trades specifically: does it capture receipts by phone camera so you can do it from the van; does it connect to your business bank account so transactions flow in automatically; does it handle CIS deductions if you work as or with subcontractors; and is the monthly cost proportionate to your size. Don’t overbuy — a sole trader doesn’t need the package a ten-van firm needs. And whatever you choose, get it running before your start date, not on it.

What it costs

Budget for two costs: the software subscription and, if you use one, your accountant’s time. Software for a sole trader is typically a modest monthly subscription; the exact figure depends on the product and the features, so compare current prices on the providers’ own sites rather than relying on a number that dates quickly. Many trades find the subscription pays for itself in reclaimed evenings and fewer missed expenses.

An accountant or bookkeeper is optional but, for a lot of trades, worth it — especially in the first year. They’ll get you set up on the right software, make sure your quarterly updates and year-end declaration are correct, and stop small errors compounding. Think of it as buying back your time and your peace of mind rather than a pure cost. If money is tight, a common middle path is to run the day-to-day yourself in the app and pay a professional to check the year-end.

Get-ready checklist

Whatever your trade, the preparation is broadly the same.

Work out your qualifying income and confirm which wave you’re in — over £50,000 puts you in from April 2026, with the threshold dropping to £30,000 in 2027 and £20,000 in 2028. Choose MTD-compatible software and get it running before your start date, not on it. Connect your business bank account so transactions flow in, and get into the habit of photographing receipts on site so nothing’s lost. If you work under CIS, make sure your software handles the deductions cleanly. Set a recurring reminder for each quarterly update so it never sneaks up on you. And if you use an accountant, talk to them now about who does what — you or them — for each quarter and the year end.

A plumber or electrician invoicing steadily through the year mostly needs to make sure every job is invoiced in the software and every expense captured. A builder juggling CIS and subcontractors has a bit more to set up, so getting the software’s CIS handling right early is time well spent. Either way, the trades who find MTD painless are the ones who treat it as a reason to finally tidy their bookkeeping rather than a deadline to dread.

Why this is a habit worth building anyway

MTD lands on trades whether they like it or not, but the underlying habit — current, digital books — is one every growing business needs regardless of HMRC. It’s what tells you which jobs actually make money, keeps your cash flow visible, and means you can prove your numbers when you want a van on finance or a bigger overdraft. The trades who come out ahead treat the deadline as the nudge they needed to run their business on real figures instead of gut feel.

FAQ

When does Making Tax Digital for Income Tax start for me? It depends on your qualifying income. It’s mandatory from 6 April 2026 if that’s over £50,000, from 6 April 2027 if over £30,000, and from 6 April 2028 if over £20,000. Qualifying income is your gross income from self-employment and property before expenses.

Is the threshold based on my profit or my turnover? Your gross income before expenses, not your profit. A trade turning over £60,000 but only clearing £35,000 profit is judged on the £60,000, so they’re in the first wave from April 2026.

Does MTD mean I have to do four tax returns a year? No. You send four quarterly updates — summaries of income and expenses — plus one year-end declaration where you finalise everything, claim reliefs and confirm the position. It replaces the single annual Self Assessment return, not adds four more of them.

Do I have to use software, or can I keep using spreadsheets? You must keep digital records and file from MTD-compatible software. You can keep a digital spreadsheet if you use bridging software to file from it, but many trades find a proper bookkeeping app less fiddly because it handles records and filing together.

I’m VAT-registered already — is MTD for Income Tax different? Yes, it’s a separate wave. You’re already under MTD for VAT, so the digital record-keeping won’t be new, but MTD for Income Tax adds quarterly Income Tax updates on top of your VAT obligations.

Do I still need an accountant under MTD? It’s not compulsory, but many trades find one worth it — especially in year one — to set up the software correctly and handle the year-end declaration. A common approach is to run the day-to-day yourself and pay a professional to check the year-end.

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Related reading: MTD quarterly updates · the £30,000 threshold from April 2027 · best accounting software for MTD · a weekly bookkeeping system