Making Tax Digital for Income Tax, explained for trades
The biggest change to how self employed people report tax in a generation went live in April, and a lot of tradespeople still have not noticed. Here is who it applies to, what you actually have to send HMRC, and the two or three things trades in particular get wrong.
The first update is due 7 August 2026
HMRC has written to more than 864,000 sole traders and landlords to say their first quarterly update, covering 6 April to 5 July 2026, must be in by 7 August. If you turned over more than £50,000 last year and you have not sent anything yet, that is the date that matters this week.
Are you in scope?
One test decides it: your qualifying income. That is the total gross income from self employment and property, added together, before any expenses come off.
Read that twice, because it is where trades get caught. The threshold is measured on turnover, not on profit, and trades carry heavy materials costs that make the two numbers look nothing alike. Turn over £62,000 fitting bathrooms with £24,000 going out on materials and your taxable profit is £38,000. You are still in scope, because HMRC is looking at the £62,000.
Live now. More than 864,000 sole traders and landlords are in this first wave.
The wave that catches most one person trade businesses.
By this point almost every working sole trader is in scope.
What a quarterly update actually is
Far less than the name suggests. It is a summary of your income and expenses for the quarter, sent to HMRC through recognised software. It is not a tax return, it does not need to be perfect, and nothing is due to be paid on the back of it. HMRC sends back an estimate of your tax bill, which is genuinely the most useful part of the whole exercise.
What it does not do is replace anything. Your Self Assessment obligation is exactly where it was, with a final declaration and the bill due by 31 January. So the honest summary of MTD is this: you now do five things a year where you used to do one.
If your books are already in software, that is four short exports. If your books are a carrier bag in the van footwell, it is four separate reckonings instead of one big one in January, and you will feel every one of them.
The four dates
Same every year. Each update is due a month and two days after the quarter closes.
| Quarter | Period covered | Due by | Worth knowing |
|---|---|---|---|
| Quarter 1 | 6 April to 5 July | 7 August | The first one ever. Covers your first three months of the tax year. |
| Quarter 2 | 6 July to 5 October | 7 November | Figures are cumulative, so this update restates the year so far. |
| Quarter 3 | 6 October to 5 January | 7 February | Lands a week after the Self Assessment deadline. Busy month. |
| Quarter 4 | 6 January to 5 April | 7 May | Closes the year. The final declaration comes later. |
You can elect to use calendar quarters instead, so 1 April to 30 June rather than 6 April to 5 July. It makes the bookkeeping tidier and the deadlines stay the same.
Four things trades get wrong
Most MTD guidance is written for consultants and landlords. These are the bits that bite when you are running a van and buying materials.
Qualifying income is turnover, not profit
This is the one that catches trades more than anything else. The £50,000 test is on gross income before a single expense comes off. Turn over £62,000 with £24,000 of materials and your profit is £38,000, which feels comfortably under. You are still in scope. Check the figure at the top of your accounts, not the bottom.
CIS subcontractors report gross, not what landed
If a contractor deducts 20% before paying you, the income figure in your quarterly update is the full invoice value, not the net amount that hit your bank. The deduction is tax already paid on your behalf and it gets picked up at the final declaration. Report the net figure by mistake and you understate your income all year.
Two income sources means two sets of updates
Qualifying income adds self employment and property together for the threshold test, but you file a separate quarterly update for each source. A sparks with a buy to let files two updates every quarter, not one.
Your shoebox of receipts is no longer legal
MTD requires digital records. Adding up paper receipts in April and typing one number into a return does not meet the requirement, even if the number is right. Records have to be kept digitally as you go, in software HMRC recognises.
What happens if you miss one
For the first year, nothing. HMRC has confirmed that no penalty points will be issued for late quarterly updates during 2026/27. That is a deliberate soft landing while everybody works out what they are doing.
From year two it becomes a points system. Each late update earns a point, four points triggers a £200 penalty, and every late submission after that costs another £200. Points expire after a spell of filing on time.
One thing the amnesty does not cover: late Self Assessment filing and late payment. Those penalties are untouched and they are the expensive ones. Missing a quarterly update this year costs you nothing. Missing 31 January still costs you plenty.
What to do this week if you have done nothing
- 1Find your gross turnover for the 2025/26 tax year. If it is over £50,000, you are in scope now.
- 2Check whether your accountant has already signed you up. Plenty have done it quietly on your behalf.
- 3Get your income and expenses for 6 April to 5 July into digital records, if they are not already.
- 4Pick software HMRC recognises. The full list is on gov.uk and it is the only place worth checking.
- 5Submit the update. HMRC says it takes minutes, and for once that is roughly true.
If your turnover was under £50,000 you have nothing to file this year. Worth using the time to get your records into some kind of order before April 2027, when the threshold drops to £30,000 and most one person trade businesses come into scope.
Where Traddie fits
Being straight with you: Traddie is not an HMRC recognised filing product for Income Tax quarterly updates today, and you should not pick it on that basis.
What it does do is the part that makes the filing survivable. Every invoice you raise and every receipt you photograph becomes a digital record with a date and a category against it, totalled by quarter, so the numbers you need on 7 August are already sitting there rather than in a carrier bag. It also tracks CIS deductions separately from income, which is exactly the split MTD needs you to keep.
Common questions
Do I have to do Making Tax Digital for Income Tax?
When is the first quarterly update due?
Does a quarterly update replace my tax return?
What happens if I miss a quarterly deadline?
How do CIS deductions work under MTD?
Can I still use a spreadsheet?
Sources
- GOV.UK, deadline approaches for first Making Tax Digital quarterly update
- GOV.UK, use Making Tax Digital for Income Tax
Written July 2026. This is general guidance for UK trade businesses and not tax advice for your particular circumstances. Check gov.uk or speak to your accountant before acting on it.
Four filings a year is only painful without records
Invoice from your phone, photograph receipts as you buy, and let the quarter add itself up. Traddie keeps the digital records MTD asks for, whichever software ends up doing your filing.