If you're self-employed — whether you're a builder, plumber, electrician, or any other trade — you've probably heard the phrase "Making Tax Digital" floating around. Maybe your accountant mentioned it. Maybe you saw it on the news. Maybe you ignored it and hoped it would go away.
It won't. But don't panic. This guide explains exactly what MTD is, whether it affects you, and what you need to do about it — all in plain English.
So what actually is Making Tax Digital?
Making Tax Digital (MTD) is a government programme that's changing how self-employed people and businesses keep their tax records and report to HMRC. Instead of filing one big Self Assessment tax return at the end of the year, you'll need to:
- Keep digital records of all your income and expenses (no more shoeboxes full of receipts)
- Send quarterly updates to HMRC (four times a year instead of once)
- Use HMRC-recognised software to do it (you can't just email a spreadsheet)
In short: HMRC wants to see your numbers more often, and they want them in a digital format. The days of scribbling figures on the back of an envelope and handing them to your accountant once a year are officially numbered.
Does MTD affect me?
If you're self-employed, the answer is almost certainly yes — the question is just when. Here's the breakdown:
Self-employed income over £50,000
You must comply from April 2026. That's right around the corner.
Self-employed income over £30,000
Your deadline is April 2027. You've got a bit more time, but not much.
Self-employed income under £30,000
No confirmed date yet, but HMRC has signalled it's coming. Getting set up early is smart.
The income thresholds are based on your gross self-employment income (that's your total turnover, before expenses). So if you're invoicing £60,000 a year but only taking home £35,000 after materials and costs, you're still in the £50,000+ bracket.
What do I actually need to do?
In practice, MTD means three things for you:
Keep digital records
Every receipt, invoice, and expense needs to be recorded digitally. Not in a notebook, not on a spreadsheet you never update — in proper HMRC-recognised software. With 123Tax, you just photograph receipts and send them on WhatsApp. We handle the digital record-keeping for you.
Submit quarterly updates
Four times a year, a summary of your income and expenses needs to go to HMRC. These aren't full tax returns — think of them as progress reports. With 123Tax, we send you a summary on WhatsApp, you confirm it looks right, and we submit it for you.
File an end-of-year declaration
At the end of the tax year, you'll still need to finalise your figures and confirm everything is correct. This replaces the traditional Self Assessment return. Again, 123Tax handles this for you.
What happens if I don't comply?
HMRC has introduced a points-based penalty system. Here's how it works:
- Every missed quarterly submission earns you a penalty point
- Reach the threshold (4 points for quarterly submissions) and you get an automatic £200 fine
- Each further missed deadline after that triggers another £200 every time
- Late tax payments incur separate interest charges on top
The penalties are designed to be fair at first — you get a few chances before they start fining you. But once they start, they add up quickly. A year of non-compliance could easily cost you £800 or more in fines alone, on top of the tax you already owe. For context, a full year of 123Tax costs from £228.
Do I need to buy accounting software?
You need HMRC-recognised software, yes. But that doesn't mean you need to learn Xero, QuickBooks, or any other complicated accounting package. There are simpler options — including 123Tax, which works entirely through WhatsApp.
Here's the honest truth: most accounting software was designed for accountants, not tradespeople. If you spend your days on scaffolding or under someone's kitchen sink, the last thing you want is to come home and stare at a dashboard full of pie charts. 123Tax was built specifically for people who want to stay compliant without changing how they work.
Key MTD dates at a glance
| Date | What happens |
|---|---|
| April 2026 | MTD for Income Tax starts for self-employed with income over £50,000 |
| April 2027 | MTD extends to self-employed with income over £30,000 |
| Quarterly | Submissions due 5th August, 5th November, 5th February, 5th May |
| 31 January | End-of-year declaration and final tax payment deadline |
The bottom line
Making Tax Digital isn't optional. It's coming for virtually every self-employed person in the UK. The good news? It doesn't have to be complicated. The whole point of services like 123Tax is to take the hassle out of it completely.
You keep doing what you're good at. We'll keep HMRC happy. That's the deal.