MTD for Income Tax: what it means for trades and skilled workers

The MTD for Income Tax requirements have arrived for many tradespeople and landlords.  

This article explains what MTD means for you, who needs to follow the rules, how digital record keeping works, and how to prepare without losing time on admin.

Key takeaways 

• MTD for Income Tax is a legal requirement from HMRC for affected sole traders and private landlords to keep digital records and send income and expense updates using compatible software. 

• The start date depends on your qualifying gross income: over £50,000 from 6 April 2026, over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028. 

• MTD for Income Tax applies to self-employment income and property income. It does not replace every part of the tax system, and it is separate from MTD for VAT. 

• If you have more than one trade or property income stream, you may need to keep records and send quarterly updates for each relevant income source. 

• Getting ready now can make quarterly updates easier and give you a clearer view of cash flow, expenses, and likely tax bills. 

Here’s what we’ll cover:

What is MTD for Income Tax?

Making Tax Digital (MTD) for Income Tax is an HMRC system that requires affected sole traders and private landlords to keep digital financial records and send regular income and expense updates through MTD-compatible accounting software. 

For tradespeople, this can include builders, carpenters, plasterers, plumbers, construction workers, and other skilled workers who run a self-employed business.  

It can also apply if you earn property income as a private landlord, including from property abroad. 

The goal is to move Income Tax record keeping and reporting away from paper records and once-a-year admin.  

Instead, your records are kept digitally, your updates are submitted at least every three months, and your annual digital tax return finalises your tax liabilities by 31 January. 

• Keep Income Tax-related income and expense records digitally using MTD-compatible software. 

• Send quarterly updates about your income and expenses to HMRC through the software. 

Send an annual digital tax return through the software to finalise your tax position. 

When does MTD for Income Tax start? 

Your mandatory start date depends on your qualifying gross income.  

The higher your qualifying income, the earlier you are brought into the rules. 

Qualifying gross income	MTD for Income Tax start date	What this means
Over £50,000	6 April 2026	You need to follow the MTD rules from the 2026/27 tax year.
Over £30,000	6 April 2027	You need to follow the MTD rules from the 2027/28 tax year.
Over £20,000	6 April 2028	You need to follow the MTD rules from the 2028/29 tax year.

HMRC should contact you if you need to follow the rules, but it is still worth checking your position yourself or through your accountant or bookkeeper. 

Who does MTD for Income Tax apply to?

MTD for Income Tax applies to earnings and expenses from self-employment and property income.  

For tradespeople, this means the fees you charge for your work, the expenses linked to that work, and any relevant property income if you are also a landlord. 

MTD for Income Tax applies to	MTD for Income Tax does not directly apply to
Self-employment income from a trade or skilled work	Profits or dividend income from an incorporated company
Relevant business expenses linked to self-employment	PAYE on salaries for company employees
UK property income	Pensions, savings income, and interest, although these may still need to be reported on your digital tax return
Overseas property income	Chargeable gains, although these can be reported on your digital tax return

If your income is above the relevant threshold and HMRC contacts you to say you need to follow MTD rules, the switch is not voluntary. 

You cannot opt out unless you qualify for a specific exclusion. 

Can you opt out of MTD for Income Tax? 

Some people can apply for an exclusion from MTD for Income Tax, but only where taking part is not possible for specific reasons.  

Examples include disability, remoteness of location where an internet connection is not available, or religious beliefs that prevent the use of the necessary technology. 

If you are already excluded from MTD for VAT for one of these reasons and nothing has changed, that exclusion should be carried across to MTD for Income Tax.  

It is still sensible to check this with HMRC. 

How can MTD for Income Tax help tradespeople? 

MTD will be a big change if you are used to keeping paper receipts, invoice books, or annual records for Self-Assessment. 

But it can also give you more regular, reliable information about your money. 

For busy tradespeople and landlords, the most practical benefits come from recording income and expenses as they happen.  

This can make it easier to see how much each job is costing, what customers still owe you, and how much tax you are likely to owe before January arrives.

Digital invoicing and payments 

MTD-ready accounting software can help you issue invoices electronically while you are still on site. 

You can include payment options on invoices, record payments digitally, and use bank feeds and automated rules to reduce manual reconciliation. 

Receipt capture and expenses 

Mobile accounting apps and data capture tools can let you photograph receipts and bills, then transfer the information into your accounting records.  

This reduces the risk of losing receipts and can make expenses easier to review each quarter.

Cash flow and job visibility 

Digital records can make it easier to monitor unpaid invoices, supplier costs, mileage, materials, and profit by job.  

If your software gives regular tax estimates, you can make decisions earlier about spending on tools, vehicles, or other business costs.

How is MTD for Income Tax different from MTD for VAT? 

MTD for Income Tax and MTD for VAT are separate systems.  

If you are VAT registered, you may already be using MTD-compatible software for VAT Returns, but you must still register separately for MTD for Income Tax and follow its own rules. 

• MTD for VAT is used for VAT records and VAT Returns. 

• MTD for Income Tax is used for self-employment and property income records, quarterly updates, and the annual digital tax return. 

• Penalty points and penalties work in a similar way, but the VAT and Income Tax systems are not linked. 

• You may need to manage both VAT Returns and MTD for Income Tax quarterly updates if both sets of rules apply to you. 

If your VAT Return dates do not line up with your MTD for Income Tax update dates, you can speak to HMRC about whether your VAT stagger can be adjusted.  

You can also apply to HMRC to move your MTD for Income Tax quarters to calendar months if that would make your records easier to manage.

What if you have more than one business or property income stream? 

If you have more than one trade, or a mixture of trade and property income, MTD may require more than one quarterly update.  

You need to keep each income source clear in your records so the right information is submitted. 

Income source	Quarterly update requirement
Each self-employed trade	A separate quarterly update for each trade
UK property income	One quarterly update for all UK property income
Overseas property income	One quarterly update for overseas property income
Annual digital tax return	One digital tax return by 31 January, bringing together all sources of income

For example, if you run a decorating business, a separate plastering business, and have buy-to-let property income, you would need to keep those records clearly separated and submit the relevant quarterly updates. 

You do not need to submit an individual quarterly update for each property.  

One update is enough for all UK property income, and one for overseas property income.

How to get ready for MTD for Income Tax 

The earlier you get organised, the easier it should be to choose software, set up your records, and build MTD into your normal working routine. 

1. Check whether you need to use MTD for Income Tax. HMRC should contact you if you are affected, but letters and emails can be missed. 

2. Decide how you want to manage MTD. You might handle everything yourself, keep your own records and ask an adviser to submit updates, or ask an accountant or bookkeeper to manage the process. 

3. Register for MTD with HMRC, or ask your adviser to do this for you. 

4. Choose MTD-compatible accounting software that suits your budget, confidence level, and business needs. 

5. Open a separate business bank account if you do not already have one. This can make payments, receipts, and bank feeds easier to manage. 

6. Start using the software before your mandatory start date if you can. This gives you time to practice capturing invoices, receipts, and bank feed data. 

What this means for your business

• You may need to change how you record income and expenses each week, not just at year end. 

• Paper-only systems are less likely to give you the records and digital trail you need for MTD. 

• Your accountant or bookkeeper may need more regular information from you than before. 

• If you get your software and banking set up early, quarterly updates should be easier to manage. 

Should you use an accountant or bookkeeper for MTD for Income Tax? 

If you already work with an accountant or bookkeeper, MTD does not mean that relationship has to change.  

What may change is the timing and frequency of the work. 

Instead of handing over paperwork once a year, you may need to share information more regularly so your records are ready for quarterly updates and your annual digital tax return. 

• Digitise records at least quarterly, including receipts, invoices, supplier statements, and bank statements. 

• Create and submit quarterly updates using your digital records. 

• Prepare your annual digital tax return for you to review and approve. 

• Help you review tax planning, cash flow, affordability, and regulatory changes that affect your trade. 

Common MTD for Income Tax mistakes to avoid 

Assuming MTD for VAT automatically covers MTD for Income Tax. It does not—you need to register and follow the Income Tax rules separately. 

• Waiting for HMRC to contact you before checking your own position. 

• Keeping paper records and planning to digitise them later, instead of recording income and expenses digitally from the start. 

• Mixing personal and business bank transactions, which can make bank feeds and record keeping harder to manage. 

• Forgetting that separate trades may need separate quarterly updates. 

Leaving the software setup until the first quarterly update is due. can manage your budget accordingly, then it can automatically generate quarterly updates based on your records.”

Final thoughts: MTD can reduce year-end pressure 

MTD for Income Tax is a major change if you are used to paper records or year-end bookkeeping.  

But it can also help you build a more regular rhythm for recording income, tracking expenses, and understanding your cash flow. 

The best next step is to check whether the rules apply to you, choose software that fits your trade, and speak to your accountant or bookkeeper if you need support.  

Once your digital records are in place, MTD should become part of your normal business admin rather than a last-minute January task.

Frequently asked questions on MTD for Income Tax

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