After years of delays, Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is finally happening. From 6 April 2026, self-employed individuals and landlords earning over £50,000 per year must keep digital records and submit quarterly updates to HMRC.
Here’s what that actually means for tradespeople — in plain English.
What’s Changing?
Currently, most self-employed tradespeople file one annual self-assessment tax return. You gather up your receipts (or ask your accountant to), tot up the numbers, and submit by 31 January.
Under MTD, you’ll need to:
- Keep digital records of all business income and expenses throughout the year
- Submit quarterly updates to HMRC using compatible software
- File an End of Period Statement after Q4 to confirm your figures
- Submit a final declaration (replacing the traditional tax return)
The quarterly updates are summaries of your income and expenses by category — not individual transactions. Think of them as progress reports rather than full submissions.
Who’s Affected First?
MTD for ITSA is rolling out in phases:
| Date | Who’s Affected |
|---|---|
| 6 April 2026 | Self-employed individuals and landlords with income over £50,000 |
| 6 April 2027 | Threshold drops to over £30,000 |
| 2028+ | Further reductions planned (over £20,000 — dates TBC) |
“Income” here means your gross business or property income, not your profit. So if you invoice £55,000 but your expenses bring your profit down to £35,000, you’re still above the first threshold.
What Software Do You Need?
HMRC requires “MTD-compatible software” but this doesn’t mean one single app has to do everything. HMRC recognises bridging software — where different tools handle different parts of the process.
The four MTD pillars are:
- Digital record keeping — storing income and expense data digitally
- Quarterly updates — submitting summary data to HMRC
- End of Period Statement — confirming annual figures
- Final declaration — completing the tax return
For Pillar 1 (digital records), HMRC explicitly lists receipt and invoice scanning as an approved method. That’s exactly what TradeDocket does — it creates digital records of your expenses, categorised by HMRC expense type.
For Pillars 2-4 (submissions), you’ll typically use your accountant’s software or a dedicated filing tool. TradeDocket’s CSV export is designed to feed directly into these tools.
What Counts as a “Digital Record”?
HMRC’s definition is broader than you might think. A digital record doesn’t have to be typed into a spreadsheet. It needs to include:
- Date of the transaction
- Amount
- Category of income or expense
A scanned receipt that’s been processed by software (like TradeDocket) counts. A photo in your camera roll does not — the data needs to be extracted into structured, searchable records.
Penalties for Non-Compliance
HMRC is using a new points-based penalty system:
- 1 point for each missed quarterly deadline
- At 4 points, you receive a £200 penalty
- Points expire after 24 months of compliance
- Late payment carries separate interest charges
The good news: HMRC has said there’ll be a “soft landing” period where penalties won’t apply for genuine mistakes in the first year. But don’t rely on that — building good habits now is far easier than scrambling later.
What Should You Do Now?
Even if your income is below £50,000, here’s our advice:
- Start scanning receipts digitally — even manually photographing them is better than a shoebox
- Separate business and personal spending where possible
- Choose your software stack — a receipt scanner (TradeDocket) plus accounting software
- Talk to your accountant about their MTD plans — they’ll need compatible software too
- Don’t panic — the quarterly updates are summaries, not detailed line-by-line submissions
The transition to MTD is a change, but it’s not as dramatic as the headlines suggest. If you’re already keeping reasonable records, you’re halfway there. Digital tools just make it faster and more reliable.
For a deeper dive into MTD requirements and how TradeDocket can help, read our complete MTD guide.
This article is for informational purposes only and does not constitute tax advice. Tax rules are subject to change. Consult a qualified accountant for advice specific to your situation.