top of page
Search

Understanding Making Tax Digital MTD for UK Tradespeople and Your Business Benefits

  • Writer: Bela El
    Bela El
  • Nov 19
  • 4 min read

Making Tax Digital (MTD) is changing how UK businesses manage their taxes. For self-employed tradespeople like plumbers, electricians, builders, cleaners, and handymen, understanding MTD is essential to stay compliant and make tax time easier. This guide explains what MTD means, why it exists, and how it affects your business. It also covers practical steps to prepare, common pitfalls to avoid, and the benefits of using the best MTD software, including Invoice Guru.


Eye-level view of a tradesperson using a tablet on a worksite
Tradesperson using digital tools on site

What is Making Tax Digital and Why Does It Exist? What does MTD for UK Tradespeople mean?


MTD for UK Tradespeople is a UK government initiative designed to modernise tax reporting. It requires businesses to keep digital records and submit tax information electronically using compatible software. The goal is to reduce errors, improve accuracy, and make tax management simpler and more efficient for both businesses and HMRC.


The government aims to:


  • Cut down on mistakes in tax returns

  • Speed up tax processing

  • Reduce the burden of paperwork

  • Help businesses stay on top of their tax affairs throughout the year


MTD is part of a wider push to bring the UK tax system into the digital age, making it easier for small businesses to comply and avoid penalties.


MTD for VAT and Income Tax Self Assessment (ITSA)


MTD for VAT has been live since April 2019. If your business’s VAT taxable turnover is above the VAT threshold (£85,000), you must keep digital records and submit VAT returns using MTD-compatible software.


From April 2026, MTD will also apply to Income Tax Self Assessment (ITSA) for self-employed individuals and landlords with income above £10,000. This means you will need to keep digital records of your income and expenses and send quarterly updates to HMRC using MTD software.


Who Must Follow MTD Rules?


  • VAT-registered businesses with turnover above £85,000 must use MTD for VAT.

  • Self-employed tradespeople and landlords with income over £10,000 will need to follow MTD ITSA rules from April 2026.

  • Businesses below these thresholds can join voluntarily but are not required yet.


How Digital Record-Keeping Works


Under MTD, you must keep digital records of your business transactions. This includes:


  • Sales and income records

  • Purchase and expense records

  • VAT records (if VAT registered)


You cannot use spreadsheets alone unless they are part of software that can connect digitally to HMRC. Instead, you need MTD software that can record, store, and send data directly to HMRC.


What Counts as Compatible Software?


Compatible software must:


  • Keep digital records of your business transactions

  • Connect directly to HMRC to submit returns or updates

  • Support MTD VAT or MTD ITSA requirements


Examples include accounting packages, bookkeeping apps, and invoicing software designed for MTD. Using the best invoicing app for tradespeople can simplify this process by combining invoicing, record-keeping, and tax submissions in one tool.


How to Prepare Now for MTD


Even if MTD ITSA starts in 2026, preparing early helps avoid last-minute stress. Here are practical steps:


  • Choose MTD-compatible software now, such as Invoice Guru, which supports MTD VAT and will support ITSA.

  • Start keeping digital records of your income and expenses.

  • Familiarise yourself with submitting VAT returns digitally if you are VAT registered.

  • Keep all receipts and invoices organised digitally.

  • Consider training or support to understand how digital tax reporting works.


Common Mistakes to Avoid


Many tradespeople face challenges with MTD. Avoid these common errors:


  • Using spreadsheets that don’t connect to HMRC directly

  • Failing to keep digital records consistently

  • Missing deadlines for submitting returns or updates

  • Not backing up digital records securely

  • Choosing software that is not fully HMRC compliant


Important Deadlines to Remember


  • VAT-registered businesses must comply with MTD VAT rules now.

  • From April 2026, self-employed tradespeople with income over £10,000 must follow MTD ITSA.

  • Quarterly updates to HMRC will replace the annual Self Assessment tax return for many.

  • Keep track of your business’s specific deadlines to avoid penalties.


What HMRC Expects from Tradespeople


HMRC expects you to:


  • Keep accurate digital records of all business transactions

  • Use compatible MTD software to submit returns and updates

  • Submit VAT returns on time if VAT registered

  • Submit quarterly income updates under MTD ITSA starting 2026

  • Retain digital records for at least six years


Meeting these expectations helps avoid fines and keeps your business compliant.


Close-up view of a tablet screen showing an MTD VAT app dashboard
MTD VAT app dashboard on tablet screen

Benefits of MTD for Small Businesses


MTD offers several advantages for tradespeople:


  • Simplified tax management: Digital records and submissions reduce paperwork.

  • Fewer errors: Automated calculations and direct submissions lower mistakes.

  • Better cash flow control: Quarterly updates help track tax liabilities throughout the year.

  • Time savings: Using the best MTD software speeds up invoicing and tax filing.

  • Improved organisation: Digital records keep your business finances clear and accessible.


Using an MTD-compatible invoicing app like Invoice Guru can combine these benefits, making tax digital and easy.


Practical Tips and Checklist for Tradespeople


  • Start using MTD software early to get comfortable with digital record-keeping.

  • Choose software that supports both MTD VAT and ITSA, such as Invoice Guru.

  • Keep all receipts and invoices scanned or saved digitally.

  • Submit VAT returns and income updates on time to avoid penalties.

  • Back up your digital records regularly.

  • Review your records monthly to catch errors early.

  • Ask for help if you’re unsure about any part of MTD compliance.


Quick MTD Readiness Checklist


  • [ ] Use HMRC compliant invoices with MTD software

  • [ ] Keep digital records of all sales and expenses

  • [ ] Submit VAT returns via an MTD VAT app if VAT registered

  • [ ] Prepare for quarterly income updates under MTD ITSA by April 2026

  • [ ] Choose the best invoicing app for tradespeople that supports MTD

  • [ ] Stay informed about deadlines and HMRC requirements


High angle view of a tradesperson entering data on a laptop with invoices nearby
Tradesperson entering digital records on laptop

Get Ready with Invoice Guru


Invoice Guru is designed for tradespeople who want an easy way to stay MTD compliant. It supports MTD VAT now and will support MTD ITSA from 2026. With features like digital invoicing, automatic record-keeping, and direct HMRC submissions, Invoice Guru is one of the best MTD software options for plumbers, electricians, builders, cleaners, and handymen.


Try Invoice Guru for free today and make your business MTD-ready. Simplify your tax management and focus on what you do best.


bottom of page