Making Tax Digital for electricians and sole traders

If you are a sole trader with qualifying income over £50,000, Making Tax Digital for Income Tax applies to you from April 2026, meaning digital records and quarterly updates to HMRC through recognised software, with the annual return becoming a final declaration. The threshold drops to £30,000 from April 2027, and £20,000 has been announced for April 2028. If you trade through a limited company this regime does not apply to you (companies have their own rules); if you are VAT registered you have been living with MTD for VAT for years already.

What actually changes

Under self assessment as it was, you could run the year off a folder of invoices and a January panic. MTD for Income Tax replaces that with three obligations:

1. Digital records. Your business income and expenses have to be recorded digitally, at or near the time, in software or spreadsheets that can transmit to HMRC. The shoebox is no longer a filing system.
2. Quarterly updates. Four times a year, a summary of income and expenses for the quarter goes to HMRC through recognised software. It is a running total, not four mini tax returns, and no quarterly tax bill comes with it.
3. The final declaration. After year end, you finalise: adjustments, allowances, other income, and the tax calculation, replacing the old self assessment return.

The quarters default to 6 April starts (with an election for calendar-month quarters), and updates are due the month following each quarter end. Miss them persistently and the points-based penalty regime starts adding up.

What "digital records" means on a Tuesday in the van

The rule is less frightening than it sounds: the record of each transaction has to enter something digital, once, and flow from there to HMRC without being retyped. What kills people is not the rule but the backlog: receipts in the door pocket and invoices "to write up at the weekend" turn the quarterly update into four Januaries a year.

The practical answer is recording things where they happen. Invoice raised the day the job finishes. The materials receipt photographed at the counter, not filed on the dashboard. Payments recorded when they land. Do that and the quarterly figure already exists when the deadline comes; it is read off, not assembled.

What software do you actually need?

Two roles matter, and they can be one product or two working together:

• Keeping the books. Where the invoices, expenses and payments live day to day. This is what Pascal does for a trade business: every quote, invoice, payment and expense is recorded as part of running the job, so the quarterly income and expense figures for any period are a report, not a project. To be plain about it: Pascal is not HMRC-recognised filing software and does not file anything or give tax advice. It keeps the books you file from correct.
• Filing. The HMRC-recognised software that transmits the quarterly update and final declaration. Accounting packages like Xero sit here, and HMRC publishes the list of recognised products. On Pascal's Pro plan, invoices flow into Xero on their own, dated the day you raised them, landing in the right quarter.

Plenty of sole traders will have an accountant do the filing leg. That works, but the accountant can only file from records that exist, which puts the first role back on you.

What to do this year

If you are over the threshold, do not design your MTD life in the March before it starts. (Thresholds and dates here are correct as of September 2026; they are policy, and policy moves, so check the HMRC guidance linked above before planning around the later ones.) Get the record-keeping habit running now: invoices out of the software the day the work finishes, receipts captured on site, payments logged as they arrive. When the first quarterly update falls due, the difference between a business that did that and one that did not is an afternoon against a fortnight.