Making Tax Digital for Tradespeople — What You Actually Need to Know in 2026

Making Tax Digital. Two words that make every sole trader groan.

You've probably heard it's "mandatory" or "coming for you." There's been talk of it for years. Some of it's happening now. Some of it isn't yet. No one explained it properly, so here it is in plain English.

What Is Making Tax Digital?

The government wants your tax records in digital form, submitted digitally, with no papery spreadsheets doing the rounds.

Instead of:

• Keeping handwritten records, spreadsheets, and shoe boxes of receipts
• Doing your own tax return in January, uploading an XML file to HMRC

You'll:

• Keep records digitally from day one (invoices, receipts, mileage)
• Submit quarterly updates to HMRC showing income and expenses
• Let HMRC see your numbers in real time (kind of)
• File a final annual return

It sounds worse than it is. Most people already keep invoices digitally. Most decent accounting software does the quarterly submission automatically. You're not manually uploading anything; your software does it.

The Timeline (Important)

This is where it gets confusing because it's rolling out in stages:

Making Tax Digital for Income Tax (the bit affecting you as a tradesperson)

• April 2026 (now): Mandatory for self-employed people earning £50,000+
• Early 2027 (exact date not confirmed): Mandatory for everyone earning £30,000–£50,000
• Later, probably 2028: Might come down to £10,000 earners, but not yet confirmed

If You Earn Under £30,000 Right Now

You're not forced to use MTD yet. But your accountant will probably recommend it anyway because it's easier and cheaper than managing multiple record-keeping methods.

If You Earn £30,000–£50,000 Right Now

You've got until early 2027. Start now, get used to it.

If You Earn Over £50,000 Right Now

You're already mandatory. If you're not doing MTD, you're not compliant. Seriously, fix this now.

What MTD Means for You Day-to-Day

Nothing, really. If you're using decent invoicing or accounting software, it's already MTD-compatible. Your software sends the data to HMRC. You don't do anything extra.

What You Need to Do

1. Keep digital records (you probably already do)

   • Invoices (as issued and received)
   • Receipts for expenses
   • Mileage records (or use a mileage app)
   • Bank statements or payment records

2. Use MTD-compatible software (we'll list these below)

   • Software must be digitally connected to HMRC
   • It submits quarterly summaries automatically
   • You don't manually create these summaries

3. Submit quarterly updates

   • Your software does this automatically
   • You see a summary showing income and expenses for the quarter
   • You can review it before it goes to HMRC (though you usually just hit "send")

4. File your annual return

   • Still happens, but based on the quarterly submissions
   • Should only take an hour to review and file

Which Software Works for MTD?

If You're Using These, You're Fine

• Xero: Fully MTD-compliant. Submits quarterly returns automatically. Handles CIS correctly.
• QuickBooks Online: Fully MTD-compliant. Submits quarterly returns automatically.
• FreshBooks: MTD-compliant. Submits automatically.
• Tradify: Can connect to MTD-compatible accounting software (exports to Xero or QuickBooks). Tradify itself isn't MTD-compliant, but you use it with another tool that is.
• Jobber: Same as Tradify. Use it for job management, export to Xero or QuickBooks for MTD compliance.

If You're Using These, You Need to Act

• Spreadsheets only: You're not compliant. You need to switch to one of the above, urgently.
• Old accountancy software (desktop versions of QuickBooks from 2015, older Sage, etc.): Probably not MTD-compliant. Check with your provider or ask your accountant.

How to Check If Your Software Is MTD-Compliant

1. Go to HMRC's list of approved MTD software (search "HMRC MTD software products")
2. Find your software on the list
3. If it's there, you're covered

It's boring, but it takes 2 minutes and saves you from a surprise fine later.

The Real Costs of MTD

Software: £10–£50/month depending on what you choose. Xero and QuickBooks are in the £15–£30/month range for most tradespeople.

Your time: Probably less than you think. With decent software, submitting quarterly is about 20 minutes per quarter (review, click send). That's it. No extra work.

Accountant fees: This might go down. Some accountants charge less now because they're not manually creating returns. Others charge the same. Ask yours.

What Happens if You Ignore It?

You don't want to find out.

If you're over £50,000 and you're not MTD-compliant:

• HMRC will notice you haven't submitted quarterly
• You'll get compliance notices
• Penalties start at £100 per quarter
• If you don't respond, it gets worse
• HMRC might estimate your tax liability (badly, not in your favour)

If you're £30,000–£50,000 when the April 2027 deadline hits:

• Same deal

Basically: you're breaking the law if you're in scope and not compliant. HMRC isn't really enforcing it yet, but that will change. Don't be the test case.

What About CIS (if you're a subcontractor)?

CIS (Contractor Information Scheme) doesn't change. You're still paid with 20% held back. But MTD software needs to handle CIS correctly.

Software that handles CIS correctly:

• Xero: Yes, has CIS-specific options
• QuickBooks: Yes
• FreshBooks: Limited (you track CIS manually)
• Tradify: No (use with Xero or QB)
• Jobber: No (use with Xero or QB)

If you're doing CIS invoicing (subbing for bigger firms), don't pick software that ignores CIS. You'll have a nightmare at tax time.

Step-by-Step: Getting MTD-Compliant in 2026

Step 1: Check If You're in Scope

• Are you self-employed or running a sole trader business?
• Did you earn £30,000+ in the last tax year?
• Are you earning £50,000+ now?

If yes to all: you're probably mandatory. Check HMRC's guidance to be sure.

Step 2: Choose Software

Use the table below. Pick one and sign up for a free trial.

| Software | Entry Price | MTD-Compliant | CIS Support | Best For | |----------|------------|---------------|-----------|----------| | Xero | £10/month | Yes | Yes | Electricians, plumbers, builders—basically anyone who wants proper accounting | | QuickBooks Online | £10/month | Yes | Yes | Same as Xero, slightly different interface | | FreshBooks | £12/month | Yes | Limited | Sole traders who want invoicing + light accounting | | Tradify | £35/month | Partial (via export) | No | Job management; use with Xero/QB for MTD | | Jobber | £60/month | Partial (via export) | No | Job management; use with Xero/QB for MTD |

Step 3: Migrate Your Records

This is the annoying bit. You're moving from spreadsheet or old software to new software.

For a sole trader with simple records:

• Open invoices: export from old system, import to new
• Expenses: manually add recent ones, start fresh going forward
• Takes about 2 hours

For something more complex:

• Ask your accountant to help, or
• Pay the software provider for migration support (usually £50–£200), or
• Do it yourself over a week, bit by bit

Step 4: Set Up Quarterly Reporting

Once you're in the new software:

• Check the MTD settings
• Tell the software your tax year dates (for sole traders, usually 6 April to 5 April)
• The software will tell you when quarterly submissions are due
• On the due date, you review the figures and hit "submit"

Step 5: Keep Clean Records Going Forward

• Every invoice you issue: record in software immediately
• Every receipt: upload a photo or scan to software
• Mileage: use a mileage app (many software packages have them built in) or track manually
• Bank statements: let the software import them automatically (most do)

That's it. That's compliance.

Common Questions

Q: If I'm under £30,000, do I have to do MTD? A: Not yet. But the government's aim is to make everyone do it eventually. Getting on it now saves you hassle later.

Q: Can my accountant just do MTD for me? A: They can help set it up and review submissions, but the law says you (the business owner) have to keep digital records. So you need software, not just an accountant.

Q: What if my software loses all my data? A: It won't (it's a reputable company with backups), but you're covered. All major MTD software has business continuity insurance. And HMRC has a 30-day grace period if your software breaks.

Q: Do I really need to track mileage? A: If you claim mileage expenses, yes. Use a mileage app (most cost £2–£5/month) or a spreadsheet. HMRC will ask for it on a tax check.

Q: What's the difference between MTD and Self-Assessment? A: Self-Assessment is the overall tax return process. MTD is just the quarterly digital submission part of it. Self-Assessment still exists; MTD is how you feed data into it now.

The Honest Take

MTD sounds scary because the government bungled the communication. It's actually simpler than the old way if you use decent software. You're just submitting quarterly data instead of once a year. Your software does the work.

You don't need to do anything immediately unless you're earning over £50,000 right now. But if you're close or over that threshold, switch to Xero or QuickBooks this month. Get used to the interface. Do a test quarterly submission. By the time your first real quarterly is due, you'll know exactly what you're doing.

Cost to stay compliant: £15–£30/month. That's it. That's your insurance against HMRC penalties.

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Still confused about MTD? Ask your accountant. That's what they're for. If they can't explain it clearly, you might need a better accountant.