MTD quarterly updates: what tradespeople need to submit in 2026

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is set to take effect from April 2026 for any self-employed individuals or property owners earning over £50,000. By April 2027, the threshold will lower to £30,000. If you're a sole trader working in trades like plumbing, electrical work, or construction, these changes are going to apply directly to you and your business operations.

This guide is designed to clarify what quarterly updates entail, the specific requirements for submission, key deadlines, and the repercussions if deadlines are not met.

What is MTD for Income Tax?

MTD for Income Tax marks a significant shift from the traditional annual Self Assessment tax return to a system that requires regular digital updates to be sent to HMRC. The objective is to streamline tax processes and enhance accuracy. As a tradesperson, you'll need to use compatible software to maintain digital records and submit four quarterly updates each tax year, concluding with a final end-of-period statement.

The transition to MTD is intended to make tax processes more accurate and reduce the last-minute rush often associated with year-end submissions. For tradespeople, who often experience fluctuating income and varying expenses, this means spreading out administrative tasks throughout the year rather than facing a single, overwhelming deadline in January.

Who is affected in 2026?

Effective from 6 April 2026, MTD for ITSA will become mandatory for self-employed individuals with qualifying income exceeding £50,000. By 6 April 2027, the income threshold will reduce to £30,000, widening the scope of those affected. It is important to note that partnerships and limited companies are not included in this initial phase of MTD for ITSA.

What counts as a quarterly update?

A quarterly update involves digitally submitting your income and expenses covering a three-month period. Importantly, it is not a tax payment. Each tax year requires four such updates: Q1 spans 6 April to 5 July, Q2 covers 6 July to 5 October, Q3 from 6 October to 5 January, and Q4 from 6 January to 5 April. The submission deadline for each update is one month following the end of the quarter.

What information goes in each update?

Each update must include your total income and expenses for the period, categorised according to HMRC's specified categories. These categories may include costs of goods and materials, subcontractor expenses, wages, motor expenses, travel, equipment and tools, office costs, professional fees, insurance, advertising, finance charges, and other allowable expenses. At this stage, individual receipts are not required.

CIS deductions

If you operate under the Construction Industry Scheme (CIS) and have tax deducted by contractors before receiving payment, these deductions should be recorded separately as tax deducted rather than as an expense. Utilise the CIS deduction calculator to ensure the amounts are correctly calculated and recorded.

The end-of-period statement

Following the four quarterly updates, an end-of-period statement (EOPS) is required to finalise your figures and claim any applicable allowances. The deadline for the EOPS submission is 31 January following the conclusion of the tax year. For the 2026/27 tax year, this means the deadline will be 31 January 2028.

What software do you need?

Compliance with MTD for ITSA necessitates the use of HMRC-recognised software. HMRC provides a list of compatible software products. It is essential to select software that can submit information directly to HMRC, correctly categorise expenses, and store digital records efficiently.

Penalties for late submissions

A new points-based penalty system will be introduced for late submissions under MTD for ITSA. Each missed deadline results in one penalty point. Accumulating four points will result in a £200 fine, with additional points also incurring £200 fines. However, points will reset after a period of full compliance, offering a chance to avoid further penalties.

How to prepare

1. Review your recent tax returns. If your income is nearing the £50,000 threshold, it is wise to start preparing now.
2. Experiment with compatible software before April 2026 to find the product best suited to your needs.
3. Begin maintaining digital records immediately. Photograph receipts and record expenses regularly to stay organised.
4. Discuss with your accountant to determine who will manage the submissions.
5. Register for MTD ITSA via the Government Gateway to ensure you are set up before the deadline.

Utilise available resources such as the mileage calculator to maintain accurate travel claims and the VAT calculator if you are registered for VAT.

Additional Considerations for Tradespeople

As a tradesperson, the shift to MTD affects more than just your tax submissions; it impacts your daily operations. It is crucial to integrate MTD-compatible processes into your routine. This might mean dedicating a specific time each week to update your records and ensuring all team members are aware of the new procedures if you operate with staff.

Consider potential cash flow impacts. Although the quarterly updates are not payments, they provide a more regular insight into your financial situation. This can be advantageous for managing budgets and planning for future expenses. However, it may also highlight periods of lower income more starkly than an annual assessment would.

Another point worth noting is the potential for changes in your client billing practices. With digital records being more accessible and up-to-date, you may find clients expecting quicker invoicing and payment processes. This could necessitate changes in how you manage client accounts and follow up on outstanding payments.

Training and Support

Ensure you and your team are adequately trained in using the new software. Many software providers offer training sessions, webinars, and customer support to help users become familiar with their systems. Taking advantage of these resources can ease the transition and prevent potential issues down the line.

Engage with industry networks and forums where fellow tradespeople discuss their experiences and solutions for adapting to MTD. These communities can provide valuable insights and practical advice that is directly relevant to your situation.

FAQ

When does MTD for Income Tax start for tradespeople?

MTD for ITSA starts on 6 April 2026 for those earning above £50,000. From 6 April 2027, the threshold reduces to £30,000.

How often do I submit updates?

You are required to submit four quarterly updates per year, plus an end-of-period statement and a final declaration for each income source.

What happens if I miss a quarterly deadline?

You will receive one penalty point for each missed deadline. Accumulating four points results in a £200 fine, with each additional point attracting further £200 fines.

Do I need new accounting software?

You will only need new software if your current system is not on the HMRC-approved list. Check the compatibility list on gov.uk to ensure your software meets requirements.

Are CIS deductions included in quarterly updates?

Yes, they should be recorded as tax deducted rather than an expense. Ensure your software includes a CIS deductions suffered field to keep your records accurate.

Conclusion

The introduction of MTD for ITSA represents a significant change for tradespeople in the UK. While the transition may seem daunting, preparing now can ease the process. By understanding the requirements, investing in the right tools, and adopting a proactive approach to digital record-keeping, you can stay compliant and possibly even enhance your business's financial management practices. Stay informed, seek support when needed, and embrace the benefits of a more systematic approach to managing your tax obligations.