Understanding Making Tax Digital (MTD) for UK Tradespeople Before 2026

Understanding Making Tax Digital for UK Tradespeople Before 2026

If you are a plumber, electrician, builder, decorator, or any other tradesperson working as a sole trader in the UK, Making Tax Digital (MTD) is going to change how you handle your taxes. The good news is that the system is actually simpler than it sounds once you understand the basics — and the tools available to help you comply are better than ever.

Here is everything you need to know before April 2026.

What Is MTD and Why Does It Matter for Tradespeople?

Making Tax Digital is HMRC’s programme to move the UK tax system entirely onto digital platforms. For tradespeople, the key change is MTD for Income Tax Self Assessment (ITSA).

Instead of filing a single annual tax return each January, you will need to:

Keep your income and expense records digitally
Submit quarterly summaries to HMRC via approved software
Complete an annual statement to finalise your tax position

This applies to you if your total income from self-employment (and/or property rental) exceeds the relevant threshold — £50,000 from April 2026, dropping to £30,000 in April 2027.

Why HMRC Is Making This Change

HMRC estimates that errors and incomplete record-keeping in traditional Self Assessment cost billions of pounds in lost tax revenue each year. Digital records are harder to lose, easier to audit, and significantly reduce the likelihood of honest mistakes.

For tradespeople specifically, common issues include:

Lost or forgotten receipts for materials and tools
Forgotten cash payments received
Mileage not tracked properly
Mixing personal and business transactions

MTD is designed to make these problems less likely — and give HMRC better visibility when they do occur.

What Counts as Income for MTD Purposes?

For the threshold calculation, qualifying income includes:

All income from your trade (before deducting expenses) — so if you are a plumber who turns over £55,000 but has £20,000 in expenses, your qualifying income is still £55,000
UK property rental income if you also rent out property

It does not include PAYE employment income, savings interest, or dividends.

How the Quarterly System Works in Practice

Think of it like sending HMRC a quick financial update every three months. You are not calculating your exact tax bill — you are just telling HMRC: “Here is roughly what I earned and spent this quarter.”

The four reporting periods in the tax year are:

Quarter 1: 6 April to 5 July (submit by 5 August)
Quarter 2: 6 July to 5 October (submit by 5 November)
Quarter 3: 6 October to 5 January (submit by 5 February)
Quarter 4: 6 January to 5 April (submit by 5 May)

At the end of the year, you submit a final statement confirming everything is accurate.

What Digital Records Do You Need to Keep?

You must record every business transaction digitally:

Income: Every invoice you raise and every payment you receive, including cash. The date, amount, and client should be recorded.

Expenses: Every cost you incur for the business. For tradespeople this typically includes:

Materials purchased for jobs
Tools and equipment
Van or vehicle costs
Fuel and mileage
Protective clothing and workwear
Public liability insurance
Professional subscriptions and training

Practical Tips for Tradespeople

Keep Your Van Receipt Ready

Get into the habit of photographing receipts the moment you receive them — at the merchant, before they fade or get lost. A good invoicing app with receipt capture means you can do this in seconds and never lose another one.

Use a Business Bank Account

Even a basic business account makes record-keeping dramatically simpler. All your income and expenses flow through one place, and there is no confusion between personal and business spending.

Invoice Every Job, Every Time

Under MTD you need a digital record of every payment. If you currently accept cash and do not always raise an invoice, now is the time to change that habit. Professional invoices sent digitally create an automatic record.

Track Your Mileage

If you use your van or car for business, mileage is one of your biggest allowable expenses. Use an app to log journeys automatically rather than trying to reconstruct them at tax time.

Do Not Wait Until April 2026

If you are above the threshold, start using compliant digital record-keeping now. You want your first quarterly submission to be straightforward, not a frantic catch-up.

The Penalty for Getting It Wrong

HMRC uses a points-based system for late submissions. Each missed quarterly deadline earns a point. At four points, you receive a £200 fine — and another £200 for every subsequent late submission until the points are cleared.

The message is clear: occasional mistakes are forgiven, but persistent non-compliance is expensive.

Invoice Guru: Built for Tradespeople

Invoice Guru was built with exactly these challenges in mind. It is a mobile invoicing and record-keeping app that lets you create professional invoices, capture receipts, track expenses, and maintain the digital records required under MTD — all from your phone.

For UK tradespeople who want to stay compliant without spending hours on admin, InvoiceGuru is a practical, affordable solution with built-in MTD compliance. Start your free trial today and be ready before April 2026.