Making Tax Digital Explained Simply for Tradespeople

Making Tax Digital is not a new tax. Nobody is charging you more. It changes two things: how you keep your records, and how often you tell HMRC what they say.

If you are VAT registered, you are already in part of it

There are two Making Tax Digitals and they are easy to confuse.

MTD for VAT already applies. Every VAT-registered business is signed up. HMRC says you no longer need to do it yourself. If that is you, you are already keeping digital records and filing VAT through software.

MTD for Income Tax is the one arriving now, and it covers your Self Assessment. Being in the first does not put you in the second. Everything below is about Income Tax.

Does it apply to you, and when

It depends on how much you earned, and in which year. HMRC looks back at a past year to decide when you start.

• Over £50,000 in the 2024–25 tax year — you should have started on 6 April 2026. If you missed it, you can still sign up.
• Over £30,000 in 2025–26 — you start on 6 April 2027.
• Over £20,000 in 2026–27 — you start on 6 April 2028.

That figure is turnover, not profit: the money that came in before you took any costs off. HMRC calls it your qualifying income.

Two things about it catch people out.

It is your self-employment and property income added together. HMRC's own example: £27,000 from self-employment and £25,000 from a rental adds up to £52,000, so you are in. A wage from a PAYE job does not count, and neither do dividends or a pension.

And HMRC checks a year that has already finished. You could be quieter now than you were two years ago and still be in it.

HMRC will write to you if their records say you are in scope, but it is still your job to check. There is a free tool on gov.uk that asks a few questions and tells you if and when you start. There are exemptions too — being digitally excluded is one — and you have to apply for most of them.

What actually changes

Three things.

Your records have to be digital. A shoebox of receipts is no longer enough. Neither is writing it in a book. It has to be in software HMRC lists as compatible. Which apps do what: Best Apps for Self-Employed Tradespeople.

You send an update every three months. Your software adds up your income and expenses and sends the totals. HMRC does not get your individual receipts or invoices. It is a summary, not a tax return, and no tax is due on it. The deadlines are 7 August, 7 November, 7 February and 7 May.

You still do a return at the end. This is the part people get wrong. The quarterly updates do not replace your tax return, they come before it, and the return now goes through the same software.

So it is more often, not more work, as long as the records are made as you go.

If you leave it all to January, it is now four Januaries.

One thing worth knowing: after each update, your software can show you an estimate of the tax bill so far. That is new. You no longer have to wait until the year is over to find out.

What you can put against your income

The costs of running the business:

• materials and parts
• tools
• fuel and van running costs
• insurance
• the business share of your phone
• equipment hire
• subcontractors
• an accountant

Keep the record at the time. A receipt you cannot find is a cost you cannot claim, and you pay tax on money you have already spent.

What the numbers look like

You fit a bathroom for £3,000.

That £1,550 is what HMRC taxes. It is your income from that job.

Here is the part worth understanding. Your own time is not in that sum, and it never will be. If you are a sole trader you cannot pay yourself a wage and deduct it. HMRC treats what the business made as your income. Money you take out is drawings, not a cost.

So £1,550 is the tax figure. It is not what the job made you. If the bathroom took you five days, that £1,550 is £310 a day for your labour, and there is nothing left over on top.

Both numbers are real. They just answer different questions, and only one of them is going to HMRC.

That second number, what the job actually made you, is worked out here: How Do I Know If My Jobs Are Actually Profitable?

Doing it as you go

You will keep digital records either way. The choice is when.

Record it as it happens and the quarterly update is a few minutes. Leave it, and you spend an evening every three months going through a bag of receipts trying to remember what a £46 payment to a merchant was for in May.

The receipt is in your hand at the counter. That is the cheapest moment to deal with it, and it never comes again.

How Nule fits

Nule keeps the records as you work. You photograph the receipt at the merchant. Materials, expenses and mileage go on the job. Invoices come out of the same place.

It forecasts the tax as you go, so you know what is owed before the letter arrives, and it shows you how much is already set aside.

Your accountant logs into the same records. Making Tax Digital submissions are in beta.

There is a longer walkthrough in The Tradie's Guide to Making Tax Digital.

Do you still need an accountant?

That is your call and MTD does not change it much.

Some tradespeople file their own and always have. Others want someone to check it and tell them what they missed. Either way, an accountant working from records kept all year costs less of their time than one working from a carrier bag.

The short version

Making Tax Digital asks you to do a small thing four times a year instead of a large thing once.

If your records are made as the work happens, that is all it is.

If they are not, the deadline is the least of it — you are also running a business without knowing what it made you until ten months after the fact.

Checked against HMRC guidance on gov.uk on 27 July 2026. Thresholds, dates and deadlines change — check your own position with the eligibility tool on gov.uk, or ask your accountant.