MTD for Sole Traders 2026: Deadlines, Rules and Free Software

The short answer

If your qualifying income from self-employment or property is over £50,000, you must follow Making Tax Digital for Income Tax from 6 April 2026. Over £30,000 joins from April 2027, and over £20,000 joins from April 2028. It means keeping digital records and sending four short quarterly updates to HMRC each year. It is not a new tax, and it does not replace your Self Assessment return.

Who has to do MTD for Income Tax?

You are in scope if your qualifying income, the gross income from self-employment plus property before expenses, is over the threshold. It is turnover that decides this, not profit.

That means plenty of tradespeople are already in scope. An electrician billing £60,000 a year, or a plumber turning over £80,000 with a couple of big bathroom refits, is over the £50,000 line even before expenses are deducted. For builders and other construction trades the rule bites quickly, because CIS job values run high. The full detail and the official checker are on gov.uk MTD guidance.

What exactly do you have to do?

MTD replaces the shoe box of receipts sorted out in January with four checkpoints through the year. In practice you need to:

• Keep digital records of all income and expenses in HMRC-compatible software; spreadsheets alone do not count

• Send a quarterly update, a short summary of income, expenses and profit, within about a month of the period ending

• Send an End of Period Statement (EOPS) once a year, confirming your annual totals

• File your Self Assessment return as usual by 31 January, because MTD does not replace it

A quarterly update is not a tax return. You are not paying tax with it, and you are not listing every receipt, just the summary figures, which is why it takes most people minutes.

If your invoicing is already digital the update is largely done for you. The invoicing features in InvoiceAdept keep every job, quote and payment in one place, so your income total is there when the quarter ends.

Many UK tradespeople also find it helpful to review Making Tax Digital for sole traders at this stage.

What are the quarterly update deadlines for 2026/27?

HMRC set the first deadline as 7 August 2026, for the update covering 6 April to 5 July. The rest of the year follows the same pattern: each update is due about a month after its period ends.

What happens if you're late?

For the 2026/27 tax year HMRC has confirmed there are no penalty points for late quarterly updates; it is a bedding-in year. That does not mean nothing matters. Penalties still apply for a late Self Assessment return and late tax payments, so 31 January still counts.

From 6 April 2027 the points system switches on: one penalty point for each missed quarterly deadline, and once you reach four points HMRC charges a £200 fixed penalty. Points expire after a period of compliance.

Which software do you need?

You can only send quarterly updates through HMRC-recognised software. The official list is on GOV.UK, and genuinely free options exist, including basic MTD filing bundled by several banks. See HMRC MTD guidance before you pay for anything.

Whatever you file with, your invoicing needs to be digital first, because the update is only as good as your records. A tool like the InvoiceAdept invoice builder keeps every job, quote and payment in one place, so when the quarter ends your income total is already there rather than buried in a glovebox. Clean digital records are the difference between a ten-minute update and a weekend of receipts. The wider picture for UK tradespeople is on the Making Tax Digital hub.

If you are sorting this alongside other compliance work, read MTD quarterly updates guide.

What about VAT, CIS and National Insurance?

MTD for Income Tax sits alongside three other UK tax rules that affect tradespeople, and it is worth bundling them together when you plan your records.

The VAT registration rules mean that once your taxable turnover passes £90,000 you must register, and that changes how you price and invoice. Under the Construction Industry Scheme, a main contractor deducts 20% from a registered subcontractor and 30% from one who is not registered. Self-employed National Insurance rates run at 6% on the main slice of profit and 2% above £50,270.

None of these are the same as MTD for Income Tax, but they share the same root cause: clean, digital records. If you work in construction, the CIS invoices tool puts the 20% or 30% deduction on the invoice directly, and it writes the records MTD needs as it goes.

Worked example: a sole trader electrician

Saj runs an electrical business in Leeds as a sole trader. Last year's turnover was £62,000 with £18,000 of expenses, comfortably over the £50,000 threshold, so MTD applies from April 2026.

Related: see MTD-compatible software for tradespeople for practical next steps.

In his first update period, 6 April to 5 July 2026, his records show £14,200 of invoices and £3,800 of expenses. His quarterly update is three numbers: income £14,200, expenses £3,800, profit £10,400. He sends it through his recognised software before the 7 August 2026 deadline, repeating the routine three more times that year.

At year end he sends his End of Period Statement, then files Self Assessment by 31 January as usual. The first update took Saj under ten minutes, because every job had been invoiced digitally.

Sign up before HMRC signs you up

From September 2026 HMRC begins enrolling, in stages, customers who should be on MTD for the 2026/27 tax year but have not registered. If HMRC signs you up, you lose the choice of when to start and the time to pick software. Doing it yourself takes about ten minutes:

1. Create or log in to your Government Gateway account and sign up for MTD for Income Tax

2. Choose HMRC-recognised software; check the compatible-software list on the MTD guidance

3. Check whether you qualify for an exemption, for example if you are digitally excluded

4. Get your invoicing and expense records into one digital system before your first period ends

FAQs

Do I have to do MTD if my turnover is over £50,000 but my profit is low?

Yes. The threshold is qualifying income, your gross income before expenses, not profit. A tradesperson invoicing £60,000 a year is in scope even if expenses leave them with £25,000 of profit. Between £30,000 and £50,000, you join from April 2027.

Does MTD replace my Self Assessment tax return?

No. Quarterly updates are summaries of income, expenses and profit. You pay no tax with them, and you still file your return by 31 January. Your updates feed into that return, and HMRC says those in scope must send their updates to submit a return at all.

Worth pairing this with our guide to MTD penalties for late filing.

Can I keep using my spreadsheet?

Only if it links to HMRC-recognised software. A standalone spreadsheet does not count under MTD, because updates must be filed through compatible software. Spreadsheet users add bridging software, or switch to a tool that keeps records digital from the start, such as the invoicing features on InvoiceAdept.

What happens if I don't sign up?

HMRC will sign you up anyway. From September 2026 it is enrolling customers who should be on MTD for 2026/27 in stages. If HMRC enrols you, you lose the choice of when to start and the time to choose software. Signing up yourself keeps you in control, and there are no penalty points for late updates this year either way.

The bottom line

MTD for Income Tax is live, it covers more tradespeople than most realise, and the September 2026 letters are coming for anyone who has not signed up. The threshold is £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028, so the best time to get your records digital is before your band starts.

Get your invoicing digital first with InvoiceAdept, keep clean records through the year, and each quarterly update becomes a ten-minute job. It is free to register, the pricing stays transparent, and there is more detail on the Making Tax Digital hub.