Making Tax Digital: what sole-trader tradespeople need to know

Making Tax Digital, or MTD, is the biggest change to how sole traders handle their tax in a generation, and it is arriving soon. If you are self-employed in the trades, it will change how you keep your records and how often you talk to HMRC. It sounds daunting, but the core idea is simple, and getting ready early takes the stress out of it. Here is what it means for you, in plain terms.

Key takeaways: MTD for Income Tax starts on 6 April 2026 for sole traders with qualifying income over £50,000, then over £30,000 from April 2027 and over £20,000 from April 2028. You will keep digital records and send HMRC a summary every quarter instead of one tax return a year. The threshold is based on your turnover, not your profit.

What MTD for Income Tax actually is

MTD for Income Tax is a new way of reporting your self-employed earnings to HMRC. Instead of pulling everything together once a year for the Self Assessment return, you keep your records in digital form and send HMRC a short update every three months. At the end of the year you confirm everything with a final declaration.

The aim, from HMRC's side, is fewer errors and a more up-to-date picture of what you owe. For you, it means smaller, more regular jobs rather than one big scramble in January, provided your records are in order as you go.

When it starts and who it affects

MTD for Income Tax is being brought in over three years, based on your qualifying income:

• From 6 April 2026: sole traders and landlords with qualifying income over £50,000

• From 6 April 2027: those with qualifying income over £30,000

• From 6 April 2028: those with qualifying income over £20,000

If your income is below £20,000, you are not currently required to join, though that may change in future. HMRC looks at the figures on your most recent return to decide when you are caught, so it is worth knowing roughly where you stand.

What "qualifying income" really means

This is the part that trips people up. Qualifying income is your gross income from self-employment and any property, added together. Gross means turnover, the total your customers pay you, before you take off any expenses. It is not your profit.

So a sole trader who turns over £60,000 but takes home £35,000 after materials and running costs is still measured on the £60,000. That puts them in the first wave from April 2026. Work out your number on turnover, not on what is left at the end.

What you will actually have to do

Three things change once you are in the scheme:

• Keep digital records. Your income and expenses need to be recorded digitally using compatible software, rather than in a paper cashbook or a shoebox of receipts.

• Send quarterly updates. Four times a year you send HMRC a running summary of your income and expenses. These are estimates, not final figures, so they do not need to be perfect.

• Submit a final declaration. After the tax year ends you confirm your figures, claim any reliefs and allowances, and this replaces the old Self Assessment return.

How to get ready now

The single best thing you can do is stop keeping records on paper. Once your income and expenses are captured digitally through the year, quarterly updates become a quick review rather than a rebuild. Get into the habit of recording each job and each expense as it happens.

Check that whatever you use is MTD-compatible software that can talk to HMRC directly. Speak to your accountant if you have one, so you both know who is doing what. And do not wait for your start date to arrive, running your records the new way for a few months beforehand makes the switch painless.

A few myths worth clearing up

MTD does not mean you pay tax more often. It changes how often you report, not when the bill is due. It is also separate from MTD for VAT, which already applies to VAT-registered businesses. And no piece of software is HMRC-approved in the sense of guaranteeing your return is right, the responsibility for your figures stays with you.

That last point is worth holding on to. Good software, such as TradePilot, can keep your income, expenses and mileage in digital form and build a quarterly summary ready for MTD, but it is a tool to make the records easy, not a replacement for knowing your own numbers.