Making Tax Digital for Tradespeople: The Complete Guide for 2026

What is Making Tax Digital?

Making Tax Digital (MTD) is HMRC's programme to move the UK tax system online. The goal is to reduce errors, close the tax gap, and make it easier for businesses to get their tax right.

MTD for VAT has been in place since April 2019. The next phase is MTD for Income Tax Self Assessment (MTD ITSA), which affects sole traders and landlords. This is the one that matters for most tradespeople.

Under MTD for Income Tax, instead of filing a single Self Assessment tax return once a year, you will need to:

• Keep digital records of your business income and expenses
• Send quarterly updates to HMRC through compatible software
• Submit a final end-of-period statement at the end of each tax year

This is a significant change from the current system. If you are a self-employed plumber, electrician, builder, or any other tradesperson filing Self Assessment, this applies to you.

MTD for Income Tax: Key Dates

• April 2019MTD for VAT went live (already in effect)
• 6 April 2026MTD for Income Tax starts for sole traders and landlords earning over £50,000/year
• 6 April 2027Threshold drops to £30,000/year
• 6 April 2028Threshold expected to drop to £20,000/year

If you are a self-employed tradesperson earning over £50,000 a year, you must be using MTD-compatible software from 6 April 2026. This is not optional. HMRC has confirmed these dates and they are now in legislation.

If your income is between £30,000 and £50,000, you have until April 2027. If you earn between £20,000 and £30,000, you have until April 2028. But there is no reason to wait. Getting set up early means you are compliant from day one and avoid any last-minute problems.

Who Needs to Comply?

You need to use MTD for Income Tax if all of the following apply:

• You are registered for Self Assessment
• You get income from self-employment, property, or both
• Your qualifying income is above the threshold for that year

This includes sole trader tradespeople of all types: plumbers, electricians, builders, carpenters, plasterers, painters and decorators, roofers, tilers, gas engineers, heating engineers, joiners, landscapers, and any other self-employed trade.

If you operate as a limited company, MTD for Income Tax does not apply to you directly. It applies to sole traders and partnerships.

If you are a CIS (Construction Industry Scheme) subcontractor operating as a sole trader, MTD for Income Tax applies to you.

What Counts as Qualifying Income?

Qualifying income is your total gross income from self-employment and property before expenses and tax. It is not your profit. It is your turnover.

For example, if you are a plumber who invoices £55,000 in a year but has £20,000 in expenses, your qualifying income is £55,000, not £35,000. You would need to comply from April 2026.

Qualifying income includes:

• All income from your trade (labour, materials, callouts)
• Rental income from any properties you own
• Any other self-employment income

It does not include:

• Employment income (if you also have a PAYE job)
• Pension income
• Savings interest or dividends

If you are not sure whether you are above the threshold, check your last Self Assessment return. Look at your total turnover, not your profit.

What Digital Records Do You Need to Keep?

Under MTD for Income Tax, you need to keep digital records of:

• Every sale and invoice you raise (date, amount, customer)
• Every business expense you incur (date, amount, category)
• Any adjustments or corrections

The records must be kept in digital form using MTD-compatible software. A paper notebook or a folder of receipts is not enough. Spreadsheets on their own are not compliant unless they are connected to bridging software that can submit to HMRC.

For tradespeople, this means every quote you send, every invoice you raise, and every expense you claim needs to be captured digitally. If you are already using an invoicing app like Fixxa, your income records are already digital. You just need to make sure your expenses are captured too.

What about receipts?

You do not need to scan or photograph every receipt. But you do need a digital record of each expense. Most MTD software lets you enter expenses manually, import them from your bank, or scan receipts using your phone camera.

How long do you need to keep records?

HMRC requires you to keep your digital records for at least 5 years after the 31 January submission deadline of the relevant tax year.

Quarterly Updates Explained

Instead of reporting your income once a year, MTD for Income Tax requires you to send quarterly updates to HMRC. These are summaries of your income and expenses for each quarter. They are not tax returns.

The standard quarters are:

After the final quarter, you submit an End of Period Statement (EOPS) to confirm the figures are correct. Then you submit your final tax return by 31 January as normal.

What if I get a quarter wrong?

You can correct previous quarters in later submissions. HMRC has confirmed that quarterly updates are not binding in the same way as a tax return. They are progress updates, not final declarations.

What Software Do You Need?

You need software that can:

• Create and store digital records of your income and expenses
• Send quarterly updates to HMRC via the MTD API
• Submit your end-of-period statement
• Submit your final tax return

HMRC maintains a list of MTD-compatible software on GOV.UK. There are two types:

1. Full record-keeping software that handles everything in one place
2. Bridging software that connects your existing records (like spreadsheets) to HMRC

For most tradespeople, full record-keeping software is the better option. It captures your invoices and expenses as you go, so there is nothing extra to do at the end of each quarter.

Can I use more than one software product?

Yes. HMRC allows you to use different software for different tasks. For example, you could use Fixxa for quoting and invoicing and a separate accounting package for your tax submissions. As long as they work together and cover all the requirements, that is fine.

Does my accountant handle MTD for me?

Your accountant can submit your quarterly updates and tax return on your behalf using their own software. But you still need to keep digital records of your income and expenses throughout the year. You cannot hand your accountant a shoebox of receipts in January anymore.

Penalties for Non-Compliance

HMRC uses a points-based penalty system for MTD. Here is how it works:

Late submission penalties

Each time you miss a quarterly submission deadline, you receive one penalty point. Once you reach a certain number of points, you get a £200 penalty. After that, every further missed deadline is another £200.

The points threshold depends on how often you submit. For quarterly submissions, you need 4 points before the first penalty. So if you miss all four quarters in your first year, you hit the threshold and start getting fined.

Late payment penalties

Separately from submission penalties, there are penalties for paying tax late:

• 15 days late: no penalty (grace period)
• 16 to 30 days late: penalty of 2% of tax owed
• 31+ days late: 2% initial penalty plus 4% annualised on the outstanding amount

Interest on late payments

HMRC charges interest on any tax paid late. The rate is the Bank of England base rate plus 2.5%.

The message is clear: set up your digital records now, submit on time, and pay on time. The penalties are not huge individually but they add up quickly if you ignore them.

MTD for Tradespeople: Trade-Specific Guidance

Plumbers and gas engineers

If you are a self-employed plumber or gas engineer, your typical income comes from callouts, repairs, installations, and servicing contracts. All of this counts towards your qualifying income. Materials you buy and charge to customers count as income when invoiced (not just your labour).

Common expenses to track: van costs, fuel, tools, Gas Safe registration, public liability insurance, materials, workwear, phone.

Electricians

Self-employed electricians often work on a mix of domestic and commercial jobs. All income from first fix, second fix, rewires, inspections, and testing counts. If you are NICEIC or NAPIT registered, your registration fees are a deductible business expense.

Common expenses to track: van costs, fuel, tools, test equipment, NICEIC/NAPIT fees, Part P registration, insurance, materials.

Builders and general contractors

Builders often have higher turnover due to materials costs included in invoices. Remember, qualifying income is based on turnover, not profit. If you invoice £80,000 but £40,000 is materials, your qualifying income is still £80,000.

If you are a CIS subcontractor, your gross payment or net payment certificates do not change your MTD obligations. You still need to report through MTD if your qualifying income is above the threshold.

Common expenses to track: materials, plant hire, skip hire, subcontractor costs, van, fuel, tools, site insurance, CSCS card.

Painters, plasterers, tilers and other finishing trades

Finishing trades tend to have lower materials costs and higher labour proportions. You are still caught by MTD if your total turnover exceeds the threshold. Track your income per job and your expenses as you go.

Common expenses to track: materials, van, fuel, tools, dust sheets, insurance, advertising.

How Fixxa Helps With MTD

Fixxa is built for tradespeople who work on-site, not at a desk. Here is how it helps you stay on top of MTD:

Digital invoicing out of the box

Every quote and invoice you create in Fixxa is automatically stored as a digital record. Date, amount, customer details, job description. All captured without you having to do anything extra.

Voice-powered record keeping

You do not need to type anything. Talk through the job, Fixxa builds the quote or invoice. Your records are created as a side effect of getting paid.

All your records in one place

No more digging through WhatsApp messages, paper notebooks, or email threads. Every invoice, every quote, every payment is stored in the app and accessible anytime.

Built with MTD in mind

Fixxa is designed with Making Tax Digital compliance as a core consideration. We are working towards full MTD-compatible quarterly submission directly from the app, so you can meet your HMRC obligations without needing a separate accounting package.

Card payments built in

When your customer pays through Fixxa's payment link, the payment is automatically matched to the invoice. No manual reconciliation needed.

Common Questions About MTD

Getting Ready: Your MTD Checklist

The best time to get started is now. The earlier you set up digital invoicing, the less work you have to do when the deadline arrives. With Fixxa, you can be up and running in 2 minutes.