If your self-employment turnover was over £50,000 on your 2024/25 tax return, Making Tax Digital for Income Tax has applied to you since 6 April 2026. The test is on gross turnover before expenses, not on profit, which is why it catches a one-van business that never thought of itself as large. By April 2028 the threshold falls to £20,000 and essentially every full-time self-employed tradesperson is inside it.
Guide · Updated August 2026
| Qualifying income | Tested on the return for | Mandated from |
|---|---|---|
| Over £50,000 | 2024-25 | 6 April 2026 — already live |
| Over £30,000 | 2025-26 | 6 April 2027 |
| Over £20,000 | 2026-27 | 6 April 2028 |
The awkward part is the lag. The return that puts you in scope was filed long before the obligation starts, so by the time the rules bite the number that decided it is history. A tradesperson who crossed £30,000 for the first time in 2025-26 is mandated from 6 April 2027 even if turnover falls back the following year.
HMRC's wording is worth quoting because the paraphrases get it wrong: qualifying income is your total income from self-employment and property, and it is the amount before expenses — also known as turnover — based on the tax return you submitted in the previous tax year.
Not profit. Not what is left after materials. For a trade business this is the difference between comfortably outside and already inside, because materials, subcontract labour, fuel and plant hire can be most of the invoice.
A sole-trader plumber's 2024-25 return showed turnover of £71,000, with £24,000 of materials, £9,000 of subcontract labour and £7,500 of van and other running costs. Taxable profit £30,500.
He thinks of himself as earning £30,500 and assumes the £50,000 threshold is nowhere near him. The test is on £71,000. He has been mandated since 6 April 2026, and his first quarterly update was due 7 August 2026.
He also has £4,000 of rent from a lodger's flat. Property income aggregates with self-employment turnover for the test, so it would have counted too.
Included: self-employment turnover and property income, aggregated across all sources.
Excluded: employment (PAYE) income, partnership profit shares, dividends — including dividends from your own company — the State Pension, private pensions, UK REIT and PAIF income, transition profits from basis period reform, and qualifying care relief income.
Two consequences of that exclusion list for trades. Partnerships are not yet in scope at all — HMRC has said only that partnerships will need to use MTD for Income Tax in future and that the timeline will be set out later. And a director-shareholder of a limited company taking salary and dividends has no qualifying income from that company and is not brought in by it. If you are a one-van business inside MTD, that is one of several reasons the structure question is worth revisiting — though it is not on its own a reason to incorporate.
A further group was deferred to April 2027 at Budget 2025: recipients of trust and estate income, users of averaging adjustments, recipients of qualifying care income, and foreign entertainers and sportspeople.
Keep digital records, and send a cumulative update four times a year from compatible software. Each update covers the year to date, not just the quarter — so a mistake in quarter one is corrected by the quarter two figures rather than by an amendment.
| Period | Deadline |
|---|---|
| 6 April – 5 July | 7 August |
| 6 April – 5 October | 7 November |
| 6 April – 5 January | 7 February |
| 6 April – 5 April | 7 May |
These are the standard periods. The year-end position is still finalised through a return after the final update, so the quarterly updates are not four mini tax returns — they are running totals.
For a trade business the practical adjustment is not the filing. It is that the bookkeeping has to be roughly current all year rather than assembled in a carrier bag in January. That is a real change of habit, and it is the reason we put clients on bank feeds and receipt capture before the first quarter rather than after the first penalty.
Nothing about MTD changes how CIS deductions are recovered. For a sole trader they still go on the self-employment pages and are set against the Self Assessment liability after the year end — see the cash-flow guide and CIS for subcontractors. What MTD does change is that your records need to distinguish gross invoice value, materials and deduction suffered as you go, rather than once a year. That is a gain in practice: most trades who move to quarterly reporting find under-claimed materials for the first time, because they are looking at the payment and deduction statements while the job is still fresh.
Late submission is points-based: one point per missed quarterly update or return deadline, with a penalty at a four-point threshold. Importantly, there are no penalties for missed quarterly update deadlines in 2026-27 — the first year is a soft landing on submissions.
Late payment percentages have increased, and those are not soft:
In a taxpayer's first year in the new regime there are 30 days from the due date to pay or contact HMRC before penalties start; after that it is 15 days. Penalties are paused from the date HMRC is contacted if a payment plan is agreed — which is worth knowing before a bad month becomes an expensive one.
Read the two halves together and the message is clear. HMRC is being lenient on the new filing obligation in year one and considerably tougher on paying late than it used to be. A trade business that files its updates and pays late is worse off under the new regime than one that does the reverse.
The test is gross turnover, so on typical trade margins a one-van operation clears £50,000 without being anything like a large business. Those businesses were already mandated from 6 April 2026 on the basis of their 2024-25 return. At £20,000 from April 2028, essentially every full-time self-employed tradesperson is in — including part-time and second-income trades who turn over £25,000 on evenings and weekends.
There is one further Budget 2025 item worth noting: from 1 April 2026 a finalisation measure clarifies MTD scope, gives HMRC regulatory powers for exemptions, mandates MTD-compatible software for qualifying individuals, and amends the penalty reform legislation. The direction of travel is that compatible software is not optional.
What we do about it, in order: work out from your last filed return which band and date apply to you; get the records onto software with a bank feed and photo receipt capture before your first quarter rather than during it; separate materials, subcontract labour and CIS suffered in the chart of accounts so quarterly updates and CIS recovery come out of the same records; and set the four deadlines as recurring reminders. The MTD service page sets out how that works in practice, and accounts and tax covers the year-end finalisation.
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It depends on your gross turnover and which tax year's return tests it. Turnover over £50,000 on your 2024-25 return means you have been mandated since 6 April 2026. Over £30,000 on your 2025-26 return brings you in from 6 April 2027, and over £20,000 on your 2026-27 return from 6 April 2028. The measurement is taken from the Self Assessment return you submitted in the previous tax year, so the figure that decides it is already filed. Employment income, partnership profit shares, dividends from your own company, the State Pension and private pensions are all excluded from the test, and partnerships are not yet in scope at all.
Turnover, and this is what catches trades out. HMRC defines qualifying income as your total income from self-employment and property before expenses — the amount otherwise known as turnover. Materials, subcontract labour, fuel and plant hire are not deducted before the test. A plumber turning over £71,000 with £24,000 of materials, £9,000 of subcontract labour and £7,500 of running costs makes a £30,500 profit but is tested on £71,000, so he was mandated from 6 April 2026. Property income is added to self-employment turnover across all sources, so a small rental can tip a borderline case over a threshold.
A cumulative update from MTD-compatible software, covering the tax year to date rather than just the three months in question, so an error in one quarter is corrected by the next quarter's running total instead of by an amendment. The four standard deadlines are 7 August for the period to 5 July, 7 November to 5 October, 7 February to 5 January and 7 May to 5 April. The year-end position is still finalised through a return after the final update, so quarterly updates are not four separate tax returns. The real change for a trade business is that the bookkeeping has to stay roughly current all year.
Late submission works on points: one point per missed quarterly update or return deadline, with a penalty charged at a four-point threshold. There are no penalties at all for missed quarterly update deadlines in 2026-27, so the first year is a soft landing. Late payment is where it has got harder — the charges rose from 2 to 3 percentage points at 15 days, from 2 to 3 percentage points at 30 days, and from 4 to 10 percentage points a year from day 31. In your first year in the regime you get 30 days from the due date to pay or contact HMRC before penalties start, and 15 days after that.
Not through the company. A director-shareholder taking a salary and dividends has no qualifying income from that company for these purposes, because employment income and dividends — including dividends from your own company — are both excluded from the test. Company profits are dealt with through corporation tax, not MTD for Income Tax. You would only be caught if you had other self-employment or property income of your own above the relevant threshold. Partnerships are also outside the regime for now; HMRC has said only that partnerships will be brought in and that the timeline will be published later.
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