Making Tax Digital: what UK tradespeople actually need to know

Making Tax Digital (MTD) is HMRC's plan to move the UK tax system online. The idea is simple: instead of filling in one big Self Assessment tax return at the end of the year, you'll report your income and expenses digitally throughout the year.

It's already been in place for VAT-registered businesses since 2019. Now it's coming for income tax.

If you're a sole trader or landlord with gross income (that's turnover, not profit) over £50,000, you're in the first wave from April 2026.

It's being rolled out in phases:

So even if you're under the threshold right now, it's heading your way. Better to get set up early than scramble later.

Three things, and none of them are complicated once you know what's expected.

You need to keep digital records of your income and expenses. That means every job you invoice, every material you buy, every bit of fuel and tool cost, recorded digitally with the date, amount, and category.

A spreadsheet technically counts, but only if it can talk to HMRC-compatible software. Realistically, you want proper software handling this for you.

Instead of one annual tax return, you'll submit updates to HMRC every 3 months. That's 4 quarterly updates per year, plus a final declaration at the end.

The quarters follow the tax year: 6 April to 5 July (update due 7 August), 6 July to 5 October (due 7 November), 6 October to 5 January (due 7 February) and 6 January to 5 April (due 7 May).

You'll need software that HMRC recognises for submitting your updates. This isn't optional, you can't just email HMRC a PDF. The software needs to connect to their systems directly.

The big names like Xero, QuickBooks, and FreeAgent are all MTD-compatible. If you're already using one of those for your invoicing or accounts, you're in decent shape.

HMRC are introducing a points-based penalty system. Every time you miss a quarterly deadline, you get a point. Stack up enough points and you're looking at a £200 fine.

Think of it like penalty points on your driving licence, except it's your tax return, and HMRC don't offer speed awareness courses.

The silver lining: HMRC have confirmed that for the first year (2026/27), you won't receive penalty points for late quarterly updates. They're giving everyone a grace period to get used to the system. But don't mistake that for "it doesn't matter yet." The clock is ticking.

Fair question. The main differences are frequency and format.

Right now, you do one Self Assessment return per year. Under MTD, you're reporting 4 times a year, plus a final declaration. And it all has to go through compatible software, no more filling in the online form on the HMRC website.

The upside? If you're keeping your records up to date throughout the year, that January panic disappears. No more spending your Christmas holidays digging through receipts and bank statements trying to remember what that £347 payment to Screwfix was for.

Here's the practical stuff. No waffle, just what you need to do.

Here's the thing most articles about MTD won't tell you: if you're already running your jobs, quotes, and invoices through proper software, you're most of the way there.

The tradies who'll find MTD painful are the ones still running their business off scraps of paper and memory. The ones who quote verbally, invoice late, and only think about their finances when the tax deadline looms.

If your quotes turn into jobs, your jobs turn into invoices, and your invoices sync to your accounting software, you've basically got a live, digital record of your business that MTD needs. The quarterly updates become a formality, not a fire drill.

That's exactly how SortedMate works, by the way. Quotes, jobs and invoices in one place, synced to Xero or QuickBooks, which do the actual HMRC filing. Native MTD submissions from SortedMate are in development, so for now the app keeps the records straight and your accounting software sends the update. When MTD asks "where's your digital record of income and expenses?" you can point at your phone and say "right here, mate."

Making Tax Digital isn't optional, and it's not going away. But it's also not the end of the world. It's HMRC catching up with how most decent businesses already operate, keeping records digitally, tracking income properly, and not leaving everything to the last minute.

Get your records sorted now. Pick your software. Talk to your accountant. And when the next quarterly deadline rolls around, you'll be ready instead of scrambling.

Less paperwork, more paid work. That's the whole point.