Making Tax Digital for Income Tax: What It Means for a Sole Trader Trade Business in 2026

Making Tax Digital for Income Tax: What It Means for a Sole Trader Trade Business in 2026

Direct answer: Making Tax Digital for Income Tax started on 6 April 2026 for sole traders with qualifying income over £50,000. Below that, the same rules reach you on 6 April 2027 (over £30,000) or 6 April 2028 (over £20,000). It replaces one annual tax return with digital records, quarterly updates and one final return, sent through compatible software.

Written by Daniel Sedgwick, founder of Checker and a former gas engineer.

If you run a gas, heating, electrical or plumbing business as a sole trader, this is the first year Making Tax Digital for Income Tax is a real obligation rather than a distant date on a government press release. It changes how often you report to HMRC and what you need to keep, but it does not change how much tax you owe. This guide works through who it applies to, what the new quarterly rhythm actually involves, what happens if you miss a deadline, and where a job management app can and cannot help.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax is HMRC’s new way for sole traders and landlords to do Self Assessment [1]. Some things stay exactly as they are: you still submit one tax return for the year and still pay your tax bill by 31 January following the end of the tax year [2]. What changes is everything leading up to that return. You need compatible software, you keep digital records of your self-employment and property income and expenses in it, and you send HMRC a quarterly update every three months rather than one lump of paperwork the following January [2].

The scheme only reaches sole traders and landlords who are already registered for Self Assessment and have submitted a tax return, and only for self-employment or property income [1]. It has nothing to do with VAT, and if you employ staff it has nothing to do with PAYE either. Partnerships are not yet included; HMRC says it will set out a timeline for them separately [1].

Does it apply to your business in 2026?

Whether you’re in scope, and when, depends on your qualifying income, which is worked out from the Self Assessment tax return you already submitted for an earlier year, not a forecast of this year’s takings [1].

[1]

If your 2024 to 2025 tax return showed qualifying income over £50,000, you should already have started using Making Tax Digital for Income Tax from 6 April 2026. If you haven’t signed up yet, you can still do it now [1]. If your income sits under £50,000 today, the same mechanism catches you later: HMRC reviews your Self Assessment return every year and checks it against the threshold for that tax year [9]. If you go over, HMRC writes to confirm you need to join from the following 6 April, but the guidance is direct on this point: it stays your responsibility to check even if the letter doesn’t arrive [1].

How do you work out your qualifying income?

Qualifying income is your total turnover from self-employment and property income, added together, before you deduct any expenses [9]. HMRC’s own worked example is a useful sanity check: £25,000 from rental income plus £27,000 from self-employment income gives qualifying income of £52,000, which is over the £50,000 threshold even though neither figure is on its own [9].

A few things that trip up trade businesses specifically:

• Money from employment (PAYE), a partnership share, dividends, or a pension does not count towards qualifying income at all [9].
• If you stopped one job or property source partway through the year but still have another self-employment or property source running, the ceased income still counts towards your qualifying income for that year [9].
• If your accounting period runs shorter or longer than 12 months, HMRC annualises your self-employment income for you; if the qualifying income comes from property, you need to annualise it yourself [9].
• A jointly owned property counts your own share of the income, not the whole property’s income [9].

If your qualifying income later drops back under the threshold and stays there for three tax years running, you can choose to opt out of Making Tax Digital for Income Tax [9].

What do you have to do every three months?

This is the part that actually changes your working week. Once you’re in, you keep digital records of your self-employment and property income and expenses inside software that works with Making Tax Digital for Income Tax [3]. A digital record needs the amount, the date the income or expense happened, and the category, using the same categories you’d already use on a Self Assessment return [3].

Every three months, your software adds those records up into a quarterly update: a running total of income and expenses by category for each business you have. HMRC is explicit that these are summaries, not tax returns, and no individual receipt or invoice is sent across [4]. You still have to send one even in a quiet quarter with no income or expenses to report [4].

Most sole traders use standard update periods, which line up with the tax year. The deadlines are fixed regardless of which update pattern you use:

[4]

So for a sole trader who joined from 6 April 2026, the first year in practice looks like this: digital records from 6 April 2026, first update by 7 August 2026, second by 7 November 2026, third by 7 February 2027, fourth by 7 May 2027, and the tax return itself by 31 January 2028 [2]. You can send an update any time between the end of the period and the deadline, and even up to ten days early if you’re confident there’s nothing else to add [4].

If you jointly let a property, you can leave expenses out of the quarterly figures and report them once, after the year ends, by resending your fourth update before you submit your tax return [4].

What happens at the end of the tax year?

The quarterly updates don’t add up to your tax return on their own. Once the year is done, you use your software to check the totals, add any reliefs or allowances such as capital allowances or Rent-a-Room relief, and then bring in every other source of income and gains that isn’t self-employment or property [5]. HMRC will pre-fill some of this for you, including PAYE employment income, pension income, student loan information and Construction Industry Scheme deductions, but you still have to check it before you submit [5]. Anything HMRC doesn’t already hold, such as savings interest or dividends, you add yourself [5].

You then submit through your software by confirming the information is correct and complete [5]. The deadline is the same one that’s always applied: 31 January following the end of the tax year, and you can submit any time from the start of the new tax year up to that date [5]. If you think you’re due a refund, that still has to be claimed separately; a Making Tax Digital for Income Tax return itself can’t process one [5].

What if you miss a deadline?

HMRC has replaced the old late filing and late payment penalties with a points-based system for anyone using Making Tax Digital for Income Tax, starting from the tax year you join [6]. Missing a quarterly update deadline (once points apply to updates) or a tax return deadline earns one penalty point. Reach four points and you get a £200 penalty, then another £200 each time you miss a further deadline [6]. Running more than one business doesn’t multiply the risk: you can only pick up one point per deadline, even if that deadline covers several quarterly updates [6].

There is one concession in the first year. HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year specifically, though you still have to send the updates before you can submit your tax return, and points still apply to a late tax return itself for that year [4].

Points expire on their own if you stay under the threshold: any point below 4 is removed automatically 24 months after the missed deadline [6]. Once you hit 4, clearing them needs two things done together: everything sent on time for 12 months, and every outstanding update or return from the previous 24 months brought up to date [6].

Late payment works differently and isn’t points-based; the penalty depends on how many days late you pay:

[6]

You get 30 days from the payment due date in your first year using the new penalties (15 days after that) to pay in full or agree a payment plan with HMRC before penalties start, and agreeing a plan pauses the penalty clock from the date you contact HMRC [6]. Interest on late payment applies separately from the first day it’s overdue, regardless of any penalty [6].

Could you be exempt?

Some exemptions are automatic and need no application. If your qualifying income is £20,000 or less, you’re automatically exempt [7]. Partnerships are also currently exempt as a whole class, pending a future timeline [1]. Beyond that, HMRC lists specific automatic exemptions tied to particular Self Assessment supplementary pages, including averaging relief for farmers, qualifying care relief for foster carers, income from trusts or estates, and a handful of other narrow cases [7]. If none of those apply and you still can’t reasonably use digital tools, there’s a separate application route for a digital exclusion exemption [7]. If you’re exempt, you don’t stop reporting; you carry on filing a standard Self Assessment tax return as before [1].

Does this apply the same way in Scotland, Wales and Northern Ireland?

Income Tax administration is a UK-wide HMRC function, and the guidance for Making Tax Digital for Income Tax sets out the same thresholds, dates, records and quarterly obligations for every sole trader and landlord across England, Scotland, Wales and Northern Ireland; nothing in HMRC’s published guidance singles out a different rule for any one nation [1] [2] [3] [4] [5]. Scotland sets its own Income Tax rates and bands, which affects how much tax you pay, but that’s a separate matter from whether and when Making Tax Digital for Income Tax applies to you. If your business operates across more than one nation, or you’re unsure how a devolved rate interacts with your own return, check directly with HMRC or your accountant rather than relying on a general summary.

What should you do before your start date?

1. Check your qualifying income for the relevant earlier tax year and confirm which threshold and date applies to you [1].
2. Check whether an exemption applies before you do anything else, since an exempt business doesn’t need to sign up at all [7].
3. Choose software that works with Making Tax Digital for Income Tax. HMRC does not supply software itself; you need a product that either creates digital records directly or, if you still use spreadsheets, bridging software that connects to them and sends the actual submissions [8].
4. Sign up, which needs you to already be registered for Self Assessment and to have submitted a tax return in the last two years [10]. Agents can sign up on a client’s behalf [10].
5. Start keeping digital records from the date your accounting period requires, and build the quarterly deadlines into your calendar rather than your memory [2].

Where does a job management app fit in?

Making Tax Digital for Income Tax is a Self Assessment obligation, and the compatible software HMRC describes has to create digital records of your income and expenses, send quarterly updates and submit the tax return itself [3] [8]. Checker is not that piece of software, and this guide won’t pretend otherwise. What Checker does is hold the operational side of a job: the customer, the job record, the certificate or report for the work, and the invoice, all in one place, accessible on your phone whether or not you’ve got signal on site.

That still matters for Making Tax Digital, because the update you send every quarter is a total of income and expenses, and that total is only as accurate as the invoicing behind it. A trade business that keeps every invoice inside Checker’s job and invoice records has a clean, dated, itemised record to hand to whichever compatible software or accountant is doing the actual submission.

Checker also syncs invoices and payments with Xero in both directions, so if Xero (or a similar accounting platform plugged into your Making Tax Digital software) is where your quarterly totals are actually built, your Checker invoicing feeds it rather than sitting in a separate system you have to re-enter by hand. If you’re weighing up how job management and accounting software should work together for this specific obligation, the longer breakdown on choosing job management software that integrates with Xero covers that pairing in more depth. For the compatible software itself, the quarterly submissions and the final return, HMRC’s own software directory and your accountant remain the right place to look. Checker’s own plans start at £10.99 a month if you want to see whether the job-record side is worth tidying up before your own start date arrives.

Frequently asked questions

Authoritative sources

1. Find out if and when you need to use Making Tax Digital for Income Tax, HMRC, last updated 26 March 2026, accessed 2026-09-04.
2. Use Making Tax Digital for Income Tax: Before you use this guide, HMRC, last updated 16 July 2026, accessed 2026-09-04.
3. Use Making Tax Digital for Income Tax: Create digital records, HMRC, last updated 16 July 2026, accessed 2026-09-04.
4. Use Making Tax Digital for Income Tax: Send quarterly updates, HMRC, last updated 16 July 2026, accessed 2026-09-04.
5. Use Making Tax Digital for Income Tax: Submit your tax return, HMRC, last updated 16 July 2026, accessed 2026-09-04.
6. Penalties for Making Tax Digital for Income Tax, HMRC, last updated 30 March 2026, accessed 2026-09-04.
7. Find out if you can get an exemption from Making Tax Digital for Income Tax, HMRC, last updated 28 May 2026, accessed 2026-09-04.
8. Choose the right software for Making Tax Digital for Income Tax, HMRC, last updated 13 July 2026, accessed 2026-09-04.
9. Work out your qualifying income for Making Tax Digital for Income Tax, HMRC, last updated 16 July 2026, accessed 2026-09-04.
10. Sign up for Making Tax Digital for Income Tax, HMRC, last updated 24 August 2026, accessed 2026-09-04.

Keep your job records ready for whatever your Making Tax Digital software needs

Checker holds your job records, certificates and invoices in one place, on your phone, whether or not the invoicing behind your Making Tax Digital submission needs to reach your accountant or your software.