Making Tax Digital for Builders & Tradespeople – A Simple Guide

If you're a self-employed builder, plumber, electrician, carpenter, decorator or other tradesperson, Making Tax Digital for Income Tax may change the way you keep your business records and report your income and expenses to HMRC.

The good news is that it doesn't need to be complicated.

This guide explains Making Tax Digital (MTD) in straightforward terms, what you need to do and when the rules apply to you.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC's new system for certain self-employed people and landlords.

Instead of keeping your records until the end of the year and dealing with everything at once, if you're within MTD you need to keep digital records using compatible software throughout the year.

The software is then used to send HMRC quarterly updates showing summaries of your business income and expenses.

These quarterly updates are not four tax returns. They are summaries produced from your digital bookkeeping records.

You still complete your tax return after the end of the tax year.

When does Making Tax Digital apply to me?

MTD for Income Tax is being introduced in stages.

If you're a sole trader, the current thresholds are:

From 6 April 2026: You may need to use MTD if your qualifying income is more than £50,000.

From 6 April 2027: The threshold reduces to more than £30,000.

From 6 April 2028: The threshold reduces again to more than £20,000.

Importantly, this is based on qualifying gross income before expenses, not your profit.

For example, if you're a self-employed builder who receives £55,000 during the relevant qualifying year but has £25,000 of business expenses, you don't simply use the £30,000 profit figure when deciding whether you're within the MTD threshold.

There are rules about exactly what income counts, particularly if you have more than one self-employed business or property income, so don't assume the threshold applies separately to each source of income.

What does MTD mean for a builder or tradesperson?

In practical terms, the biggest change is bookkeeping.

If you're within MTD, you need compatible software to keep digital records of your business income and expenses.

For a tradesperson, those records might include things such as:

• payments received from customers

• CIS income

• materials and supplies

• tools and equipment

• fuel and allowable vehicle costs

• insurance

• advertising

• telephone and other business expenses

• payments to subcontractors where applicable

Your exact allowable expenses will depend on your circumstances.

The important point is that the bookkeeping needs to be kept up to date digitally rather than leaving a year's worth of paperwork until the Self Assessment deadline.

What information needs to be kept digitally?

For your MTD records, you'll generally need to record information including the date of the transaction, the amount received or spent, and the appropriate income or expense category.

Compatible bookkeeping software can make this considerably easier, particularly when it's connected to your business bank account.

Transactions can come into the software through the bank feed and then be checked and put into the correct bookkeeping category.

That means instead of trying to reconstruct an entire year's accounts from receipts and bank statements, the records can be dealt with regularly as you go along.

What are the MTD quarterly updates?

Every three months, your compatible software uses your digital records to produce totals for your income and expenses.

Those totals are sent to HMRC as a quarterly update.

For somebody using the standard quarterly periods, the normal deadlines are:

7 August7 November7 February7 May

The important thing to understand is that a quarterly update isn't another full tax return.

You don't normally need to make all the accounting and tax adjustments that would be required for your final tax return before sending each quarterly update.

The purpose is essentially to send HMRC a summary based on the digital records you've been keeping.

Do I still have to complete a tax return?

Yes.

Making Tax Digital does not mean your annual tax return simply disappears.

You'll use compatible software to complete the MTD requirements during the year and submit your tax return after the end of the tax year.

Your tax return is where the final position is dealt with, including relevant adjustments, reliefs, allowances and other income or gains that need reporting.

I'm a CIS subcontractor. Does MTD still apply?

Potentially, yes.

Being paid under the Construction Industry Scheme doesn't automatically remove you from Making Tax Digital.

If you're a self-employed CIS subcontractor and your qualifying income puts you within the MTD rules, you'll need to meet the MTD requirements unless an exemption or other specific rule applies to you.

CIS and Making Tax Digital are different things.

CIS deals with deductions made from certain payments within the construction industry. MTD for Income Tax deals with how qualifying self-employed people keep digital records and report information to HMRC.

You can therefore be affected by both.

What happens if I've already missed an MTD quarterly deadline?

Don't ignore it.

For the 2026/27 tax year, HMRC has said that no penalty points will be issued for late quarterly updates.

That does not mean you can simply forget about the missing update.

If you're required to use MTD, you still need to bring your digital records up to date and send the outstanding quarterly updates.

HMRC has also stated that people within MTD will need to have sent their quarterly updates in order to submit their tax return.

The penalty system changes from April 2027, so getting into a regular bookkeeping routine now is sensible.

Do I need an accountant for Making Tax Digital?

Not necessarily.

You can deal with MTD yourself if you're comfortable using compatible bookkeeping software, keeping your records correctly and making the required submissions.

But plenty of tradespeople would rather spend their time earning money on site than sorting through bookkeeping.

That's where a bookkeeping service can help.

Making Tax Digital bookkeeping specifically for tradespeople

MTD Trade Books provides straightforward bookkeeping support aimed at self-employed builders and tradespeople.

The idea is simple: keep the bookkeeping organised during the year rather than allowing everything to pile up until January.

We can help suitable sole traders keep their digital records up to date and deal with their MTD bookkeeping requirements using compatible software.

Our service is deliberately focused on straightforward sole-trader businesses rather than trying to be everything to everybody.

If you're a builder or tradesperson and you're unsure whether Making Tax Digital applies to you — or you simply don't want the hassle of keeping on top of it yourself — get in touch with MTD Trade Books and tell us a little about your business.

Frequently Asked Questions

Is Making Tax Digital based on turnover or profit?

The MTD threshold is based on qualifying gross income before expenses, rather than simply your taxable profit.

Do I have to send HMRC four tax returns every year?

No. The quarterly updates are summaries of your digital income and expense records. They are not four separate tax returns.

I'm under the £50,000 threshold. Can I ignore MTD?

Not necessarily. The threshold reduces to more than £30,000 from April 2027 and more than £20,000 from April 2028. Which year you need to enter MTD depends on your qualifying income for the relevant earlier tax year.

Does CIS count towards Making Tax Digital?

Self-employment income earned as a CIS subcontractor can be relevant when working out whether you fall within the MTD rules. CIS itself does not provide a general exemption from MTD.

Can I use a spreadsheet for Making Tax Digital?

There are circumstances where spreadsheets can form part of an MTD-compatible system, but the records and submission process must meet HMRC's digital requirements. Many sole traders may find recognised bookkeeping software simpler.

What's the easiest way to prepare for MTD?

Start keeping your business records digitally and regularly.

If your bookkeeping software is connected to a dedicated business bank account, keeping track of business income and expenses can be considerably easier than trying to sort through a year's transactions at the end of the year.

If you'd rather have somebody take care of the bookkeeping for you, MTD Trade Books specialises in straightforward bookkeeping for self-employed builders and tradespeople.