The MTD threshold isn't what most tradespeople think it is

Dave is an electrician based in Swindon. He's been self-employed for eleven years, does decent work, has a solid reputation, and runs his books from a spreadsheet his brother-in-law set up in 2015. He invoices around £62,000 a year, spends about £28,000 on materials, tools, and van costs, and takes home roughly £34,000 after expenses. He pays his tax, files his return every January, and has never had a letter from HMRC he needed to worry about.

Dave thinks Making Tax Digital doesn't apply to him. He's heard the £50,000 threshold. He figures he earns £34,000. He's wrong— and the gap between what he thinks and what HMRC thinks is going to cost him time, money, and probably a call to an accountant he's never needed before.

When HMRC says “qualifying income over £50,000,” it means your gross turnover from self-employment and property — every invoice you raise, before a single expense is deducted.

Dave invoices £62,000. That's his qualifying income. The £28,000 he spends on materials is irrelevant to the threshold calculation. His taxable profit of £34,000 is irrelevant. HMRC sees £62,000, and from 6 April 2026, Dave is in scope for MTD for Income Tax.

This isn't buried in the small print. It's the primary mechanism of the threshold, and it's the single most widespread misunderstanding about MTD right now. Tax professionals on AccountingWEB have publicly noted that HMRC's own guidance on this is ambiguous enough that practitioners are asking each other basic questions about straightforward cases. If accountants are confused, sole traders running their businesses from a spreadsheet are effectively in the dark.

Dave's situation is the textbook case, but there are two other traps catching people equally unprepared.

On MoneySavingExpert, a sole trader who has run an energy-survey business since 2010 — someone who had never needed an accountant, ran everything from a notebook, and had a straightforward clean record — posted in April asking how to restructure his business as a partnership with his wife specifically to avoid MTD. Not because he was evading anything. Because the compliance burden felt disproportionate, nobody had warned him it was coming, and his first instinct when he found out was to find the exit.

He's not alone. The accountants' forum AccountingWEB captured another theme: the sense that HMRC's communication has been so poor that even professionals are working from incomplete information. One commenter noted that the documentation sent to software developers — the people being asked to build the systems that will process all these submissions — was “written in a way that could be interpreted multiple ways, so at least one assumption is factually correct.”That's a charitable description of guidance that's meant to underpin a legal obligation affecting hundreds of thousands of people.

Meanwhile on The Register, a sole trader described the experience plainly: “As a sole trader I have had no warning of this at all. I run from a very customised spreadsheet that totals things up to lay out exactly like the tax return. Trivial to fill in. Now all I am seeing is either large bills for software and features I do not need, and having to hand my personal tax and income details to various unknown companies.”

That's not a luddite. That's someone whose system works, being told it's now illegal.

There's a widespread assumption — circulating on forums, shared between tradespeople — that because HMRC has offered a “soft landing” for the first year, MTD isn't really mandatory yet.

Here's what the soft landing actually covers: no penalty points for late quarterly updates in 2026/27. That's it. Late payment penalties still apply. Penalties for missing the year-end declaration still apply. The soft landing is a grace period on one specific compliance mechanism — not a signal that you can safely ignore the requirement for another twelve months.

Back to Dave. If Dave ignores MTD in 2026/27 on the basis that “they're not really enforcing it yet,” he's not in the soft landing. He's non-compliant.The soft landing only helps people who are registered and submitting but occasionally miss a quarterly deadline in the first year. It doesn't help people who haven't registered at all.

Here's the detail that almost nobody publishes clearly: crossing the threshold once doesn't mean you comply once. To leave MTD, you need three consecutive years where your qualifying income stays below the relevant threshold. A tradesperson who has one strong year — a big commercial contract, a busy summer, taking on a second rental property — and crosses £50,000 for the first time is locked into MTD until at least 2029/30, even if their income drops back down immediately.

Dave had a great year. Dave is in for a while.

Open your 2024/25 Self Assessment return. Find the gross income figure from self-employment— not profit, not net, but the turnover line before expenses. If you also have rental income, add the gross rent. If the total is above £50,000, MTD applies to you now. If it's above £30,000, it applies from April 2027.

If you're close to either number and you're VAT-registered, check how your software is treating VAT in your declared income before assuming you're safely below the line.

If you're anywhere near these thresholds and you're still running from a spreadsheet or a notebook, now is the time to move to software that handles the quarterly submissions for you. The requirement isn't going anywhere — and from April 2028, when the threshold drops to £20,000, it's going to cover the vast majority of self-employed people in the UK.

By 2028, MTD will cover most of the self-employed workforce. The trades sector — electricians, plumbers, builders, decorators, landscapers — will be among the most affected, because high turnover with high materials costs is exactly the profile where the gross-income threshold feels most disconnected from financial reality.

Dave will get there eventually. The question is whether he finds out on his own terms or in a letter from HMRC.

Honest Invoices is MTD-compliant invoicing software built for UK sole traders and tradespeople. It tracks your gross income automatically, so you always know where you stand against the threshold — no spreadsheet archaeology required come January.

£15/month, locked. Built end-to-end against HMRC's MTD ITSA APIs. 14-day free trial, no card required.