What Is Making Tax Digital for Income Tax?
Making Tax Digital is the HMRC initiative to move the UK's tax system online. Instead of one annual Self Assessment tax return, self-employed individuals above the income threshold must now:
- Keep all income and expense records digitally throughout the year.
- Submit quarterly updates to HMRC using MTD-compatible software.
- Submit a final declaration at the end of the tax year.
The quarterly updates are not tax payments — they are summaries of your income and expenses for each quarter. Think of them as four mini tax returns per year instead of one big one.
The MTD Rollout Timeline for Tradespeople
HMRC is rolling out MTD for ITSA in stages based on income level:
| Date | Who is affected |
|---|---|
| April 2026 | Self-employed earning over £50,000 — mandatory now |
| April 2027 | Extends to those earning over £30,000 |
| April 2028 | Extends to those earning over £20,000 |
If you are in the £30,000–£50,000 range, now is the time to prepare — not April 2027. Building the habit of digital record-keeping takes time, and starting early means your records are complete when your deadline arrives.
Start building your digital records today
Every invoice you create in TraderInvoice is automatically stored as a digital income record. Free for up to 5 invoices per month — no credit card required.
Create Free Account — MTD-Ready from Day OneWhat Does “Digital Records” Actually Mean?
HMRC requires your income and expense records to be kept in a digital format that is compatible with MTD submission software. In plain English for a tradesperson, this means:
- Every invoice you send must be stored digitally — not just in a paper invoice book.
- Every business expense must be recorded digitally — fuel, materials, tools, insurance.
- Your records must be usable for quarterly HMRC submissions via recognised MTD software.
A spreadsheet technically qualifies as digital, but it is not connected to HMRC. You need software that can either submit directly to HMRC or export records in a format your accountant can use for submissions.
The Simplest Way for Tradespeople to Comply With MTD
The good news is that you do not need expensive accountancy software to comply. A good invoicing app for tradespeople does most of the heavy lifting automatically.
Every time you create and send an invoice through an app like TraderInvoice, that income record is stored digitally. You are building your MTD-compliant income records as a natural by-product of doing your invoicing — with no extra admin.
TraderInvoice stores all your invoice data and allows you to export your records, giving your accountant everything they need for quarterly MTD submissions to HMRC. You focus on the jobs. The digital records look after themselves.
What Happens If You Do Not Comply?
HMRC has made clear that MTD for ITSA is not optional for those in scope. Failure to keep digital records or submit quarterly updates can result in penalty points under HMRC's points-based penalty system, leading to financial penalties. The penalties accumulate over time, and persistent non-compliance is treated seriously.
The practical risk is even more immediate
Tradespeople who leave their record-keeping until the end of the year will face a painful catch-up exercise trying to reconstruct months of income and expense records from memory, bank statements, and paper receipts. Starting digital invoicing now, when the habit is easy to form, is far smarter than scrambling later.
Three Things Every Tradesperson Must Do Right Now
- 1
Switch to digital invoicing immediately
If you are still using a paper invoice book, a Word template, or a spreadsheet, now is the time to switch. A mobile invoicing app that stores your records digitally is the single most important step you can take. The sooner you start building digital income records, the better prepared you will be — and the more complete your records will be when HMRC asks for them.
- 2
Start recording business expenses digitally
Fuel, materials, tool purchases, van insurance, phone bills — every business expense you record digitally reduces your tax bill and supports your MTD compliance. Get in the habit of recording expenses as they happen, not at the end of the month when half of them are forgotten.
- 3
Talk to your accountant now
If you use an accountant, speak to them about MTD for ITSA today. They will need to submit quarterly updates on your behalf and will have preferences about what software you use for record-keeping. A good invoicing app that exports clean records makes your accountant's job — and your bill — significantly smaller.
How TraderInvoice Makes MTD Effortless
TraderInvoice was designed from the ground up with UK tradespeople in mind, including the shift to Making Tax Digital. Every invoice you create is stored as a digital record. You can export your full invoice history whenever you need it.
The voice-to-invoice feature means there is no excuse to defer invoicing until the end of the day or the end of the week. You invoice on the spot, your records are created on the spot, and your MTD compliance builds itself automatically — before you have even put your tools away.
| Feature | MTD benefit |
|---|---|
| Voice-to-invoice | Invoice on-site — records created instantly, never forgotten |
| Digital invoice storage | Every invoice is a compliant digital income record |
| Export history | Give your accountant clean records for quarterly HMRC submissions |
| VAT calculations | Correct VAT shown on every invoice — HMRC-compliant |
| Free plan available | 5 invoices/month free — start building records today at zero cost |
Get MTD-ready today — it takes two minutes
Create your free TraderInvoice account, add your business details, and invoice your next job before you leave the site. Your digital records start building immediately. Use promo code 04TI26 when you upgrade for one month free on any paid plan.
Frequently Asked Questions
Does MTD for ITSA apply to sole traders and limited companies?
- The April 2026 MTD for ITSA rules apply to self-employed sole traders and landlords above the income threshold. Limited companies are not in scope for this particular MTD rollout — they are subject to MTD for Corporation Tax, which has a separate timeline.
Do I still need to complete a Self Assessment tax return under MTD?
- Under MTD for ITSA, the annual Self Assessment tax return is replaced by four quarterly updates and a final year-end declaration. The overall process is similar — you are still declaring your income and expenses to HMRC — but spread across the year rather than done all at once.
Can my accountant handle MTD submissions on my behalf?
- Yes. Most accountants are already set up to handle MTD submissions for their clients. What they need from you is clean, complete digital records of your income and expenses. Using a compliant invoicing app makes this straightforward.
What counts as a digital record for MTD purposes?
- HMRC requires income and expense records to be stored in a digital format compatible with MTD submission software. Every invoice you send through TraderInvoice is automatically stored as a digital record, fulfilling this requirement as a natural by-product of your invoicing.