Making Tax Digital for Income Tax: What UK Tradesmen Need to Know

Last updated: 10 March 2026 · Written by Axel

Making Tax Digital for Income Tax is here. Not "coming soon" — it starts 6th April 2026 for the first wave of businesses.

If you're a tradesman running your own business, this probably affects you. Here's what's actually changing, who needs to worry, and what you need to do about it.

Photo: @leggytheplumber

What's Making Tax Digital?

MTD is HMRC's push to get businesses keeping digital records and filing returns through software instead of paper or basic online forms.

MTD for VAT has been mandatory since 2019 — if you're VAT-registered, you're already doing it. Now HMRC is extending the same approach to Income Tax Self Assessment.

Who's Affected and When?

This rolls out in phases based on your qualifying income (total business income before expenses):

Source: GOV.UK — Check if you need to use MTD for Income Tax

Will This Hit Most Tradesmen?

Probably. A plumber doing 3 jobs a week at £300-400 each is clearing £50k+ in gross income. An electrician with a couple of regular contracts is easily over £30k.

If you're a sole trader filing Self Assessment and your business is ticking along, you're likely in scope — if not in April 2026, then by April 2027.

Photo: @j.jelectrical

What You'll Actually Need to Do

1. Keep Digital Records

Your income and expenses need to be recorded in HMRC-compatible software. This means:

• Digital invoices and receipts — not a shoebox of paper
• Categorised transactions — income, materials, travel, tools, etc.
• Stored in compliant software — a spreadsheet alone won't cut it, though some software can connect to spreadsheets

You only need digital records for your self-employment and property income. Other income (pensions, dividends, savings) still gets reported on your tax return but doesn't need the same digital record-keeping.

2. Send Quarterly Updates

Instead of one big Self Assessment in January, you'll send HMRC quarterly summaries of your income and expenses.

These aren't full tax returns — they're straightforward summaries. Think of them as check-ins so HMRC can see roughly where you stand throughout the year.

The quarters follow the tax year:

• Q1: April to July
• Q2: July to October
• Q3: October to January
• Q4: January to April

3. Submit Your Tax Return

You still do an annual tax return by 31st January, but it goes through your MTD software rather than the old Self Assessment system.

HMRC is planning legislation to make this a requirement (submitting through MTD software specifically), so it's worth getting set up now.

Choosing Software

You need HMRC-recognised software. The big names tradesmen tend to use:

These are dedicated accounting tools. They handle the actual MTD submissions to HMRC.

What About Job Management Software?

Here's where tradesmen often get confused. Job management platforms like Jobber, ServiceM8, Fergus, or A.X.E.L handle your quotes, invoices, scheduling, and job tracking — but most of them aren't MTD submission tools on their own.

The typical setup is: job management software for running your business day-to-day, synced to accounting software (Xero or QuickBooks) for MTD compliance.

A.X.E.L integrates with both Xero and QuickBooks, so your invoices and expenses flow through to your accounting software automatically. We're also awaiting HMRC's approval on our integration with them, so for now — the Xero/QuickBooks route is the reliable path.

Can I Just Use Spreadsheets?

On their own, no. But some MTD software can connect to spreadsheets and pull your data through for submission. If you're dead set on keeping your Excel setup, look for "bridging software" that links spreadsheets to HMRC. HMRC maintains a list of compatible software.

Common Concerns

"I Can't Be Bothered With More Admin"

Fair. Nobody became a plumber because they love bookkeeping.

But honestly, if you're already tracking your income and expenses (even roughly), MTD doesn't add much. The quarterly updates are summaries your software generates automatically from the records you're already keeping. The actual effort is in the initial setup — connecting your bank account, choosing categories, learning where things go. After that, it's mostly automated.

"This Is Going to Cost Me"

Software costs £10–30/month for basic MTD compliance. That's the price of a takeaway. And if your accountant already uses MTD-compatible software, they might handle the submissions for you at no extra charge — worth asking.

If you're already paying for job management software, check whether it integrates with Xero or QuickBooks. Most do. You might just need to add the accounting layer.

"What If I Get It Wrong?"

HMRC has confirmed a "soft landing" period for the first year. They won't hit you with penalties straight away for minor errors or late submissions while businesses get used to the system.

After that, penalties for late quarterly submissions are points-based — you accumulate points for each late submission, and only get fined (£200) once you hit the threshold. It's designed to forgive the occasional slip, not punish honest mistakes.

"I've Got an Accountant — Is This Their Problem?"

Your accountant can submit on your behalf using MTD software. Many are already set up for this from MTD for VAT. But the digital record-keeping part is on you — your accountant can't photograph your receipts for you.

Talk to your accountant now about how you'll work together under MTD. Some are offering setup packages to help clients transition.

CIS and MTD — A Note for Construction

If you work in construction with subcontractors, you're already dealing with CIS (Construction Industry Scheme) deductions and monthly returns. MTD doesn't replace CIS — they're separate obligations.

But having good software makes both easier. Tracking labour vs materials, calculating CIS deductions, and keeping clean records for MTD all benefit from the same digital setup.

Photo: @r.j.b_construction

A.X.E.L has built-in CIS tools — automatic deduction calculations at the right rates (20%, 30%, or 0% depending on subcontractor status), labour/materials splitting on invoices, and monthly CIS return reports. That's on top of the standard quoting, invoicing, and job management features.

Your Action Plan

If You're Over £50k (Start Now)

MTD for Income Tax is mandatory for you from 6th April 2026. You should already have:

1. ✅ Chosen MTD-compatible accounting software
2. ✅ Connected your business bank account
3. ✅ Started recording digitally (even if messy — you can tidy up)
4. ✅ Talked to your accountant about the transition

If you haven't done any of this, start today. You've got weeks, not months.

If You're £30k–£50k (Get Ready)

You've got until April 2027. Use this year to:

1. Try a few free trials of accounting software
2. Get into the habit of digital record-keeping
3. Start photographing receipts instead of hoarding paper
4. Talk to your accountant about their MTD plan

If You're Under £30k (Keep an Eye Out)

The £20k threshold is planned for April 2028. You're not exempt forever — just delayed. Start building good digital habits now and it'll be painless when your turn comes.

Frequently Asked Questions

Do I need MTD for Income Tax if I'm already doing MTD for VAT?

Yes, they're separate. MTD for VAT covers your VAT returns. MTD for Income Tax covers your Self Assessment. If you're over the income threshold, you need both.

What counts as "qualifying income"?

Your total gross income from self-employment and/or property before expenses. If you have multiple income sources (e.g. you're a plumber AND a landlord), they're combined.

I'm a limited company — does this affect me?

Not yet. MTD for Income Tax applies to sole traders and landlords only. Corporation Tax MTD is on HMRC's roadmap but no date has been set.

Can I sign up early?

Yes. You can volunteer for MTD for Income Tax before you're required to. Some tradesmen are doing this to get comfortable with the system before it's mandatory.

What happens to Self Assessment?

It doesn't disappear — it gets absorbed into the MTD process. You'll still report your annual figures, but through MTD software instead of the old Self Assessment system.

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Running a trade business and want to keep your admin simple? Try A.X.E.L free — job management built for UK trades, with Xero and QuickBooks integration for MTD compliance.

Axel

Full-stack developer and founder of AXEL.TRADE. BSc Business & Management, MSc Digital Marketing (University of Salford). Based in Manchester, building websites and the A.X.E.L platform for tradesmen and small businesses.