Making Tax Digital Myths: 9 Things Tradespeople Get Wrong
Written by Tom Ellis · Senior Trades Editor
Last updated: 7 November 2026
Quick Answer
What are the biggest Making Tax Digital myths?
Making Tax Digital does not mean paying tax every quarter: you send four quarterly summaries, still file a tax return by 31 January, and pay on the same dates as now. The £30,000 test is on turnover, not profit. CIS workers are not exempt. No letter doesn't mean you're out. Late updates earn points rather than instant fines, and April 2027 joiners get a first-year break on points. Records must be digital from your start date, and free software exists.
| Myth | Reality |
|---|---|
| “I'll pay tax every quarter” | No tax is paid with quarterly updates. Payment dates stay 31 January and 31 July. |
| “Under £30k profit means I'm fine” | The test is turnover before expenses, not profit. |
| “No letter from HMRC, so it's not me” | Letters go out in phases, and HMRC says checking is your job. |
| “CIS workers are exempt” | There is no CIS exemption, and gross CIS pay counts. |
| “I'll be fined straight away” | Late updates earn points first, and April 2027 joiners get a first-year break on points. |
| “I can keep the shoebox and let my accountant sort it” | Records must be digital from your start date, kept up as you go. |
| “Quarterly updates replace my tax return” | You still file a tax return by 31 January. |
| “A photo in my camera roll counts as a record” | A record needs the amount, date and category, kept in software. |
| “MTD software always costs money” | Free options exist. Our MTD records are free on every plan. |
New to MTD? This page clears up the myths. For the full explanation, read the Making Tax Digital hub, or check whether you're in with the free Making Tax Digital checker.
Myth 1: “I'll pay tax every quarter”
Do you pay tax every quarter under Making Tax Digital?
No. Quarterly updates are summaries of your income and expenses, and no tax is paid with them. You still pay your tax by 31 January and 31 July, the same dates as now.
The "quarterly" part is reporting, not paying. Each update is a cumulative total from 6 April, due on 7 August, 7 November, 7 February and 7 May. The upside is that HMRC shows you a tax estimate as the year goes on, so the January bill shouldn't be a surprise. See every date in our MTD deadlines guide.
Source: Send quarterly updates (GOV.UK) · Submit your tax return (GOV.UK)
Myth 2: “Under £30k profit means I'm fine”
Is the Making Tax Digital £30,000 threshold based on profit or turnover?
Turnover. HMRC tests your qualifying income, which is your self-employment and property income before expenses. A tradesperson who invoiced £40,000 and made £22,000 profit in 2025-26 is over £30,000 and in from April 2027.
Trades with big material bills get caught by this most. And the line drops again: over £20,000 of qualifying income on your 2026–27 return brings you in from April 2028. See do I need MTD under £30,000?, the £30,000 threshold guide, or put your turnover into the Making Tax Digital checker.
Myth 3: “No letter from HMRC, so it's not me”
Do I need Making Tax Digital if HMRC hasn't written to me?
You might. HMRC is sending awareness letters to people with qualifying income over £30,000 in phases from autumn 2026 into early 2027, but it says it is still your responsibility to check. Not getting a letter does not mean you are exempt.
What decides it is the 2025–26 tax return you file by 31 January 2027. If that shows self-employment and property turnover over £30,000, you are in from 6 April 2027, letter or no letter. Exemptions are narrow (for example, digital exclusion on grounds of age, health, disability or no internet access where you live, which you have to apply for).
Source: Find out if and when you need to use Making Tax Digital (GOV.UK) · MTD software developer newsletter, edition 5 (GOV.UK) · Exemptions from Making Tax Digital for Income Tax (GOV.UK)
Myth 4: “CIS workers are exempt”
Are CIS subcontractors exempt from Making Tax Digital?
No. There is no CIS exemption, and your gross CIS pay, before the contractor's deduction, counts toward the £30,000 test. CIS deductions don't go in your quarterly updates. HMRC pre-fills them in your tax return and any refund comes once a year.
So a subcontractor with £36,000 of gross CIS work is in from April 2027, even though only £28,800 reached the bank after 20% deductions. The full walk-through, including refunds and chasing statements, is in Making Tax Digital for CIS subcontractors. Not sure if you're in? See do I need MTD as a CIS subcontractor?
Source: CIS subcontractors: pay tax and claim back deductions (GOV.UK) · Exemptions from Making Tax Digital for Income Tax (GOV.UK)
Myth 5: “I'll be fined straight away”
Will I be fined straight away if I miss an MTD quarterly update?
No. Late updates earn penalty points, and a £200 penalty only comes at four points. The Budget on 28 October 2026 also announced no penalty points for late quarterly updates in 2027-28 for people joining in April 2027, though the legislation is still to be passed. Late tax returns and late payment are still penalised, and every update must be sent before your tax return.
Late payment works differently. From April 2027 it is 4% of the tax unpaid at day 15, another 4% at day 30, then 10% a year. The points system also applies from April 2027 to everyone who files a Self Assessment return, not only MTD users. More in our MTD penalties guide.
Source: Penalties for Making Tax Digital for Income Tax (GOV.UK) · Budget 2026 (GOV.UK)
Myth 6: “I can keep the shoebox and let my accountant sort it”
Can I keep paper receipts and let my accountant sort them out at the end of the year?
Not once you are in MTD. From your start date (6 April 2027 for the £30,000 group) your income and expenses must be kept as digital records, made no later than the quarterly update they feed into. An accountant can still send your updates and tax return, but a box of receipts in January is too late for an update that was due in August.
Receipts kept in the glove box or faded on the dashboard are the classic problem. The fix is to record each one when you buy, not at the year end. If an accountant does your updates, agree in writing who sends what, and make sure they are set up to act for you with HMRC.
Source: Create digital records (GOV.UK)
Myth 7: “Quarterly updates replace my tax return”
Do quarterly updates replace the Self Assessment tax return?
No. You still send a tax return (previously called the final declaration) by 31 January after the tax year, through MTD-compatible software. It is where you add any other income, claim allowances and reliefs, and confirm the tax due. HMRC pre-fills PAYE, pensions and CIS deductions.
So the year looks like four quarterly updates plus one tax return. There is nothing in between: the end-of-period statement HMRC originally planned has been scrapped. Once you are in MTD, you can't file that return through HMRC's own online service any more. It has to come from software.
Source: Submit your tax return (GOV.UK)
Myth 8: “A photo in my camera roll counts as a record”
Does a photo of a receipt on my phone count as a digital record for MTD?
Not on its own. Each digital record has to hold the amount, the date and the category of the transaction in software that is digitally linked to whatever you file with. A photo sitting in your camera roll has none of that, so it still has to be entered into your records.
Snapping the receipt before it goes through the wash in your work trousers is a good habit. It just isn't the record. An app that reads the photo and saves the amount, date and category does the job: in Sleepless Tradesman that AI receipt scanning is on paid plans, and typing the expense in yourself is free.
Source: Create digital records (GOV.UK)
Myth 9: “MTD software always costs money”
Do you have to pay for Making Tax Digital software?
No. HMRC says free products are available for people with simple tax affairs, though they may have limits. In Sleepless Tradesman the MTD records (expenses, income, mileage, tax set-aside and quarterly figures) are free on every plan. Sending to HMRC from the app isn't live yet, so for now you or your accountant submit the exported figures.
Check what a free product leaves out before you rely on it, and use HMRC's software finder to see which products can submit. Our quarterly figures are produced in HMRC's MTD format, ready to export. Direct submission from the app is coming once HMRC approves it. See MTD software compared.
Source: Choose the right software for Making Tax Digital (GOV.UK)
What is actually true
- If your 2025–26 turnover from self-employment and property is over £30,000, you are in from 6 April 2027.
- You keep digital records and send four quarterly updates a year. No tax is paid with them.
- You still file a tax return by 31 January and pay on 31 January and 31 July.
- Late updates earn penalty points. Late tax returns and late payment are still penalised.
Skip the shoebox. Start your digital records free.
Expenses, cash and CIS income, mileage, tax set-aside and quarterly figures are free on every plan.
Try Sleepless Tradesman freeRelated: Making Tax Digital for tradesmen, MTD £30,000 threshold, MTD for CIS subcontractors, MTD penalties, MTD deadlines, do I need MTD under £30,000?, MTD checker.