Making Tax Digital, usually shortened to MTD, is HMRC's long-running project to move tax records and returns online. For most tradespeople it changes two things: how you keep your records, and how often you send information to HMRC. It does not change how much tax you pay.
Making Tax Digital for VAT
If you are VAT registered, MTD for VAT already applies to you, whatever your turnover. It has applied to all VAT-registered businesses since April 2022. In practice it means:
- you keep your VAT records digitally, in software or in spreadsheets connected to software
- you submit VAT returns through software that is compatible with MTD, not by typing figures into the old HMRC online form
- the figures must flow digitally from your records to the return, without being retyped
Most trades meet this through their accounting software, or by giving their accountant digital records to submit from.
Making Tax Digital for Income Tax
This is the big change for sole traders and landlords. Under the timetable HMRC has published:
| From | Who must join |
|---|---|
| 6 April 2026 | Sole traders and landlords with qualifying income over £50,000 |
| 6 April 2027 | Those with qualifying income over £30,000 |
| 6 April 2028 | Those with qualifying income over £20,000 |
Qualifying income means your total gross income from self-employment and property, before expenses. It is your turnover, not your profit. A plumber taking £55,000 a year with £20,000 of expenses has qualifying income of £55,000, so is in the first group. HMRC looks at an earlier tax year's return to decide when you are brought in, so you should be told before you need to start.
Partnerships and limited companies are not in these first phases. If you trade as a limited company, MTD for Income Tax does not apply to the company, though MTD for VAT still does if it is VAT registered.
What you will actually have to do
Once you are in MTD for Income Tax you need to:
- Keep digital records of your business income and expenses, using software that works with MTD.
- Send quarterly updates to HMRC through that software. These are summaries of income and expenses, not full tax returns.
- Submit a final tax return by 31 January after the end of the tax year, as now, where you make any adjustments and claim allowances.
With standard quarters (6 April to 5 July, and so on), each quarterly update is due by the 7th of the month after the quarter ends: 7 August, 7 November, 7 February and 7 May. Check GOV.UK for the current deadlines and whether you can choose calendar quarters.
The good news for trades
MTD sounds like more paperwork, but for many trades it forces habits that make life easier anyway. If your invoices, payments and expenses are already in one system, a quarterly update takes minutes. The pain falls on people who keep receipts in a carrier bag and do everything in January.
Four habits make MTD painless:
- Invoice from software, not a notebook. Every sale is then recorded with the right date and amount.
- Photograph receipts on the day. Expenses recorded at the time are accurate and easy to categorise.
- Separate business and personal money. A dedicated business bank account makes the records simple.
- Reconcile monthly. Ten minutes a month matching payments to invoices beats a lost weekend every quarter.
Where Cuppaflow fits
Cuppaflow is where your quotes, jobs, invoices, payments and expenses live. It does not submit returns to HMRC itself. Instead it gives you a VAT summary and MTD-friendly CSV exports of sales and expenses, and on the Pro plan syncs invoices and payments with Xero or QuickBooks, which are commonly used for MTD submissions. Your accountant can also have a free read-only login to see what they need.
That means you keep doing the work in the app you use every day, and your MTD software or accountant receives clean, complete records.
VAT: the threshold and the flat rate scheme
MTD for Income Tax applies whether or not you are VAT registered. Separately, you must register for VAT if your taxable turnover goes over the VAT threshold, which has been £90,000 since April 2024. Some small trades use the VAT Flat Rate Scheme, where you pay a fixed percentage of your VAT-inclusive turnover. It can save admin, but whether it saves money depends on how much you spend on materials, so ask your accountant before joining. Our VAT calculator helps with quick add-VAT and remove-VAT sums.
What about penalties?
HMRC uses a points-based system for late submissions under MTD, rather than an instant fine for the first slip. Points build up with each missed deadline, and a penalty is charged once you reach a threshold. Late payment of tax is treated separately and can attract interest and penalties. The details are on GOV.UK. The simplest protection is software that reminds you before each deadline, and records that are already up to date when it arrives.
Exemptions
Some people can apply for an exemption, for example if it is not reasonably practical for them to use digital tools because of age, disability or location. HMRC decides exemptions case by case. If you think one might apply to you, apply early rather than assuming.
A simple plan if MTD is coming your way
- Check your gross self-employment and property income for the last full tax year.
- If you are over or near the threshold, choose MTD-compatible software, or ask your accountant what they use.
- Get your invoices, payments and expenses into one system now, before your first quarter.
- Set reminders a week before each quarterly deadline.
- Keep checking GOV.UK, because dates and thresholds can change.
Getting organised early turns MTD from a worry into a non-event.
Spend less time on paperwork
Cuppaflow handles quotes, jobs, invoices and payments for trade businesses, with your brand on everything. Try every feature free for 14 days, then plans start at £19 a month.