Making Tax Digital for Income Tax: what it actually asks of a tradesperson

If Making Tax Digital has been on your list of things to worry about, it has probably moved up it this month. From September 2026, HMRC has started signing people up itself — anyone who should already be in for this tax year and hasn't enrolled.

Most of what's written about it comes from companies selling the software, which is why it tends to read like a threat. Here's the plainer version: who's in, what it actually asks of you, what it doesn't change, and the handful of things people most often have wrong.

Are you in, and when?

It depends on your qualifying income, and the first thing to get straight is that this is turnover, not profit. It's your income from self-employment before any expenses — and before CIS deductions, if you're a subcontractor — with any property income added on top. HMRC's own guidance uses a landlord with £25,000 of rent and £27,000 from self-employment as an example of someone at £52,000.

The test uses a tax return from an earlier year, not this one:

• Over £50,000 on your 2024/25 return: you've been in since 6 April 2026.
• Over £30,000 on your 2025/26 return: you're in from 6 April 2027.
• Over £20,000 on your 2026/27 return: you're in from 6 April 2028.

It's "over" in each case, so exactly £50,000 isn't in. Wages from a PAYE job don't count towards the figure, and neither do dividends, pensions, or your share of a partnership's profit.

A worked example, because it's where most confusion starts: a sole trader who turned over £55,000 in 2024/25 and made £28,000 of profit has been in scope since April. The profit figure never enters into it.

A brand-new business isn't brought in until after its first Self Assessment return has been filed. And if you're not sure where you stand, HMRC's checker will tell you. You don't have to wait for a letter: HMRC's guidance is explicit that the duty comes from your income, whether or not anyone has written to you.

What it actually asks you to do

Three things, and only one of them is new in kind.

Keep your records in software. Each bit of income and each expense gets an amount, a date and a category. You still keep the receipts and invoices themselves. A spreadsheet is allowed, as long as it's connected to HMRC through "bridging" software rather than retyped — once figures have gone to HMRC, they mustn't be copied across by hand into something else.

Send a quarterly update. This is a summary, not a tax return. The deadlines are:

• 7 August, for the period to 5 July
• 7 November, for the period to 5 October
• 7 February, for the period to 5 January
• 7 May, for the period to 5 April

Each update covers the tax year so far, so fixing a mistake later doesn't mean resending earlier quarters. You can opt for calendar quarters instead — periods ending 30 June, 30 September, 31 December and 31 March — but you have to choose before your first update. And if your turnover is under £90,000, each update can be just two figures: total income and total expenses.

File your tax return through the same software, by 31 January as now. HMRC fills in some of it for you — PAYE income, pensions and CIS deductions among them — and the extra "end of period statement" that earlier plans included was scrapped in 2023.

For anyone who's been in since April 2026, the timing is worth spelling out: the 2025/26 return is filed the old way by 31 January 2027, and the first return through Making Tax Digital is 2026/27, due by 31 January 2028.

What it doesn't change

When you pay. This is the most repeated myth, so it's worth being blunt: quarterly updates involve no payment. HMRC's guidance says Making Tax Digital will not change the way you pay tax or the dates payments are due. Balancing payments and payments on account stay on 31 January and 31 July.

One honest caveat. A government consultation over the summer floated more frequent payments on account for self-employed people with no PAYE income. Nothing has been decided. But that's a separate policy, and if it happens it won't be because of Making Tax Digital.

What you owe. It's a reporting change. The tax rates, allowances and expenses you can claim are the same.

What HMRC sees. Totals, not your receipts. Nobody at HMRC is reading your fuel bills four times a year.

The first year is gentler — for one thing only

For the 2026/27 tax year, HMRC isn't giving penalty points for late quarterly updates. You still have to send them before you can file the tax return, but missing 7 August this year doesn't cost you anything on its own.

That easement is narrower than it sounds:

• It only covers quarterly updates. A late tax return still earns a penalty point.
• It only covers 2026/27. From 6 April 2027, every missed deadline earns a point. At four points there's a £200 penalty, and another £200 for each further miss.
• Nothing like it has been announced for people joining in April 2027. If you're in that group, treat your first quarter as the real thing.

Late payment has its own rules, and in your first year you get 30 days after the due date before a late-payment penalty applies; after that it's 15. Points don't hang around forever — below four, each one expires after 24 months — but once you reach four, clearing them takes twelve months of meeting every deadline and catching up anything still outstanding.

Getting out is harder than getting in

This catches people out. Falling back under £50,000 — or under £30,000 — doesn't take you out again.

To leave, your qualifying income has to be £20,000 or less for three tax years in a row, and that applies even if you came in at the £50,000 threshold. The other routes out are stopping all self-employment and property income altogether, or an amended return that genuinely takes you under.

So it's worth treating this as permanent once you're in.

If you work under CIS

Three things specific to subcontractors.

Your turnover counts before deductions. What the contractor withheld doesn't bring you under a threshold — the figure is the gross amount, as it would appear on your return.

You don't enter the deductions in your quarterly updates. HMRC pre-fills them in the annual tax return. One of HMRC's campaign FAQ pages says the opposite, but its GOV.UK guidance and its technical documentation for software developers agree with each other, and those are the ones to follow.

You can't claim a refund inside the return. If more was deducted than you owe — common for subbies — the refund is requested through your HMRC online account instead. It's worth knowing before January rather than finding out then.

When you choose software, check it handles CIS in the tax return specifically. On HMRC's software finder in mid-September 2026, QuickBooks and FreeAgent were marked as ready for it, and Xero as in development.

Software, without the sales pitch

HMRC doesn't provide any. Its guidance says so plainly. What it provides is a software finder listing commercial products that work with the system.

Some are free. Filtered to individuals in mid-September 2026, the finder listed 140 products, 35 of them marked as having a free version. Those numbers move, so check them yourself — and check that a free option can file the annual tax return, not just the quarterly updates, because some of the free tools attached to bank accounts only do the updates so far.

FreeAgent is free with some bank accounts. FreeAgent's own pricing page says it's free for as long as you keep a NatWest, Royal Bank of Scotland or Ulster Bank business account, or use Mettle with at least one transaction a month. Add-ons can cost extra.

If you already use Xero or QuickBooks, both are on HMRC's list for Making Tax Digital for Income Tax.

If you're VAT-registered, Making Tax Digital for VAT has been compulsory for years and is a separate regime. The same software can usually handle both, but the penalty points are counted separately.

If you genuinely can't do it digitally

There's an exemption for people for whom it isn't reasonably practical — HMRC names age, health or disability, religious belief, and having no internet access at home, at work or anywhere suitable. You apply by phone or letter, HMRC aims to answer within 28 days, and you have 30 days to appeal a refusal.

What doesn't qualify on its own: having always done it on paper, not being comfortable with software, having few records, or the time and cost involved.

Where grafter.ly fits

Plainly: grafter.ly is not software HMRC recognises for Making Tax Digital. It doesn't send anything to HMRC, and it won't file a quarterly update or a tax return for you.

What it holds is the income side of your work — quotes, invoices and what's been paid against them. If you connect Xero, each invoice goes across when you send it and payments recorded in Xero come back, so your invoices are already sitting in software that is on HMRC's list rather than waiting to be retyped. Two limits, so you're not caught out: expenses you log in grafter.ly don't go across to Xero, and there's no export file yet if you use something else. If you're VAT-registered and invoice under the reverse charge, check how those invoices look in Xero before a VAT return goes in.

That's the honest division of labour. The recognised software does the filing; grafter.ly saves you typing the invoices into it.

What to do, depending on where you are

1. Check whether you're in, with HMRC's checker rather than a guess — and use turnover, not profit.
2. In since April 2026 and not signed up? Sign up now rather than waiting for HMRC to do it, and send any update you've missed. There are no points for late updates this tax year.
3. Starting in April 2027? Pick software over the winter, not in March. Decide on calendar quarters before your first update, which is due by 7 August 2027.
4. On CIS? Choose software that handles CIS in the tax return, and remember refunds go through your online account.
5. Not in yet? Nothing to do now. But £20,000 of turnover is fewer than ninety days' work at the £224 a day our day-rate guide arrives at, so a full-time trade should assume it'll be in by April 2028 unless the figures clearly say otherwise.

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Sources. HMRC guidance on whether and when you need to use Making Tax Digital for Income Tax, working out your qualifying income, signing up, what to do if HMRC has signed you up, using Making Tax Digital for Income Tax — records, quarterly updates and the tax return — penalties, exemptions and applying for one, and finding compatible software; the Income Tax (Digital Obligations) Regulations 2026; HMRC's outcome of the Making Tax Digital small business review; HMRC's developer guidance on year-end updates and CIS; the Budget 2025 overview of tax legislation and rates; the Timely Payments in Income Tax Self Assessment consultation; GOV.UK on understanding your Self Assessment bill; and FreeAgent's pricing page. All checked 16 September 2026; the software finder figures are as they stood that day.

This is general information about how the rules work, not advice about your own tax position.