Making Tax Digital · Guide · 5 min read

Making Tax Digital for tradespeople: 2026 and 2027 guide

Check your MTD for Income Tax start date, understand quarterly updates and organise construction income, expenses and CIS records.

By Trade PA · Published 25 June 2026 · Reviewed 15 September 2026 · Product status updated 7 October 2026

This guide is for sole-trader builders, electricians, plumbers and other trades, including subcontractors paid under CIS. It concerns personal Income Tax. VAT reporting and limited-company tax are separate questions. Read the practical MTD readiness checklist when you are ready to put the process in place.

When do tradespeople have to use MTD?

HMRC’s start dates use qualifying income from a specified earlier tax year. The threshold is “over”, not “at least”. Check the relevant return and any exemption with HMRC or your tax agent.

These dates concern eligible sole traders and landlords. Partnerships have a separate future timetable. If you did not receive an HMRC letter, check your position anyway. Use HMRC’s eligibility guidance and checker for the decision.

Turnover is different from profit and take-home pay

Qualifying income generally combines gross self-employment and property income before expenses. PAYE wages, dividends and pensions are not added to that total. Multiple businesses and a rental property can therefore change the answer. HMRC has additional rules for matters such as VAT under the cash basis, short accounting periods and ceased income sources: check its qualifying-income guidance.

Illustration: a sole trader has £27,000 business turnover and £6,000 of their own gross property income in 2025–26. The combined amount is £33,000, before costs. Looking only at the trade’s profit could lead to the wrong start-date decision. This example assumes ordinary continuing income sources; it is not an eligibility determination for every landlord.

What changes during the year?

You keep the required records digitally and send summaries through compatible software. Standard quarterly update deadlines are 7 August, 7 November, 7 February and 7 May. Calendar-period elections and more than one income source need the correct setup. Updates are cumulative for the current tax year: do not blindly upload a standalone quarter’s totals where the software expects year-to-date information. HMRC explains the periods and corrections.

The practical question is who does each stage. One business may enter receipts itself and have its accountant review the figures. Another may agree a bookkeeping service. Write down who checks transactions, who sends each update and where the acknowledgement is kept. A diary reminder does not establish that a submission happened.

A usable record has a document behind it

HMRC requires digital records and continued retention of supporting evidence. A photo of a receipt and an entry in a spreadsheet have different jobs: the image supports the transaction; the structured entry supplies the date, category and amount. If you use more than one software product, confirm the permitted digital connections rather than assuming manual retyping is an acceptable filing workflow. Read the digital-record requirements.

For a small trade business, give every invoice and expense a reference you can search. Keep supplier credits with the original purchase and identify refunds separately from new sales. When you photograph a receipt, open the saved image once to check the amount and VAT details are legible. Fixing an unreadable receipt on the day is easier than finding it several months later.

How does CIS fit alongside MTD?

CIS records still matter. Do not treat the net bank receipt as the complete sales record. Keep the invoice, any VAT treatment, the contractor’s deduction statement and the payment together. An accountant needs to distinguish business income from the tax withheld, as well as check the correct accounting basis.

Illustration only: a £1,000 labour payment with no VAT and a valid 20% CIS deduction leaves £800 paid to the subcontractor and £200 withheld. Recording only £800 as the sale loses the distinction. If you also pay your own subcontractors, their deductions belong in a different part of your records. The CIS statement guide explains the evidence to retain; ask your agent how your software handles the tax credit and return.

You still have a year-end return

Quarterly updates do not remove the annual return or turn every update into a tax payment. HMRC’s MTD process includes year-end adjustments and a tax return submitted through compatible software. The deadline is normally 31 January after the tax year. Earlier tax years still follow the applicable earlier return process. Check the year-end steps.

Agree how other income, reliefs and adjustments will be dealt with before choosing software. A tool that sends quarterly updates may not cover every part of your particular annual return. Keep a separate tax-payment plan with your accountant; a tidy dashboard is not cash reserved for a bill.

What if an update is late?

HMRC says there are no penalties for missing quarterly update deadlines for 2026–27. The updates and digital records are still required, and this does not waive tax payments or every other filing obligation. Later years have different late-submission rules. Read the current penalty guidance.

If you have missed an update, establish which records are missing and agree a catch-up plan now. Do not overwrite earlier reconciled figures to make the dashboard look complete. Keep a note of corrections and the evidence that supports them.

Choose a filing route before the deadline

Check HMRC’s compatible-software information and ask whether the product supports your income sources, quarterly work and annual return. Discuss accountant access and digital links. Trial a small sample: one sales invoice, one materials receipt, one credit and a CIS payment if relevant. Confirm the supported process end to end before depending on it.

A useful next step today

Find the relevant tax return, list your income sources and ask your accountant to confirm your start date. Then work through one month of records using the readiness checklist. Resolve missing statements, duplicated receipts and unclear responsibilities before they become a quarterly rush. General information for trade businesses, not personal tax advice.