Last checked 19 October 2026
Quick answer
If you run a shop as a sole trader, MTD for Income Tax applies once your qualifying income (sales before expenses, plus any property income) is over £50,000 (from 6 April 2026), £30,000 (from 6 April 2027) or £20,000 (from 6 April 2028), according to GOV.UK. Retailers can choose to keep one digital record of daily gross takings.
This is general information, not tax advice. Check GOV.UK or speak to an accountant about your situation. Why we say this.
This guide is for sole traders who run a shop, market stall or other retail business, taking payments in person by card and cash, and sometimes online.
What changes
Digital records
Your self-employment and property income and expenses are kept in compatible software. Spreadsheets can still be used with software that links to them.
Quarterly updates
Every 3 months your software sends HMRC a summary of income and expenses for each business. It isn’t a tax return.
A tax return at the end
You still submit one tax return a year, using your software, and pay your tax bill by 31 January after the tax year ends.
Does MTD for Income Tax apply to you?
GOV.UK says you need to use MTD for Income Tax if you’re a sole trader or landlord registered for Self Assessment, you get income from self-employment or property (or both), and your qualifying income is over the threshold for the relevant tax year. Qualifying income is your total self-employment and property income before expenses (turnover), not your profit.
| Qualifying income on your tax return for | Over | You’ll need to use MTD from |
|---|---|---|
| 2024 to 2025 | £50,000 | 6 April 2026 |
| 2025 to 2026 | £30,000 | 6 April 2027 |
| 2026 to 2027 | £20,000 | 6 April 2028 |
Source: Find out if and when you need to use Making Tax Digital for Income Tax, GOV.UK.
For a shop, turnover can be much higher than profit, because most of what comes in goes back out on stock. The MTD test uses turnover before expenses. If you’re VAT registered and use the cash basis, GOV.UK’s qualifying income guidance says you can choose to include or exclude VAT when declaring business income; if you include it, it counts towards qualifying income.
Even without a letter from HMRC, GOV.UK says it’s your responsibility to check. Its checker tool can help.
What you’ll need to keep digitally
GOV.UK says each digital record needs the amount, the date and a category (the same categories as Self Assessment). You also keep supporting records, such as bank statements and invoices, for at least 5 years after the 31 January deadline.
Daily gross takings
GOV.UK’s digital records guidance says retailers can choose to create one digital record of daily gross takings instead of recording individual sales. HMRC’s digital record-keeping direction says that record must include payments from cash-paying customers (including card payments) and the full value of credit or other non-cash retail sales, including sales through third-party online platforms. It lists things to exclude, such as refunds, void transactions, float discrepancies and use of training tills.
Card takings, cash and stock
- Card-terminal takings. Providers often settle after taking their fee. GOV.UK says that if you only know your net income, record the full income and the fees separately.
- Cash. Cash sales go into your daily takings or individual records like any other sale. GOV.UK’s record-keeping guidance lists till rolls and bank slips among the proof to keep.
- Stock you buy to sell on, and running costs such as rent, rates and utilities.
GOV.UK says a till system that only records sales doesn’t need to be digitally linked to your MTD software, but your digital records still need to be created in compatible software.
Key dates
If your qualifying income for 2025 to 2026 is over £30,000, GOV.UK’s published update periods give these dates for your first MTD year, on standard update periods:
- 6 April 2027: MTD starts and your digital records begin
- 7 August 2027: first quarterly update (6 April to 5 July 2027)
- 7 November 2027: second quarterly update (6 April to 5 October 2027)
- 7 February 2028: third quarterly update (6 April 2027 to 5 January 2028)
- 7 May 2028: fourth quarterly update (6 April 2027 to 5 April 2028)
- 31 January 2029: tax return and tax bill for 2027 to 2028
Sources: Send quarterly updates and Submit your tax return, GOV.UK. See our MTD quarterly deadlines 2027 to 2028 page for calendar update periods, and penalty points for late updates.
Free MTD deadline calendar
Add these dates to your phone or computer calendar. No email address or sign-up needed. Download the MTD key dates calendar (.ics)
What kind of software you’ll need
HMRC doesn’t provide software. GOV.UK says yours must create digital records, send quarterly updates and submit your tax return. Some software creates records itself; bridging software connects to records you already keep, such as spreadsheets. If you’re VAT registered, GOV.UK’s software guidance suggests checking whether your VAT software is also compatible with MTD for Income Tax. HMRC’s find software tool lists products that have been through its recognition process. We don’t recommend particular products.
Cash and card takings
Cash and card takings both count towards turnover. GOV.UK’s record-keeping guidance lists till rolls and bank slips among the proof to keep, and the daily gross takings option covers cash and card sales in one daily record.
Tip
If your card provider settles after taking its fee, the full sale counts towards turnover, not the amount that reaches your bank.
Questions people ask
Do I pay tax every quarter?
No. Quarterly updates are summaries of income and expenses. GOV.UK says MTD won’t change the way you pay tax or the dates payments are due.
Do I have to record every sale?
Not necessarily. GOV.UK says retailers can choose to keep one digital record of daily gross takings instead of individual sales. HMRC’s record-keeping direction sets out what it must include.
Next steps
- Work out your qualifying income: the £30,000 threshold explained
- How to sign up for Making Tax Digital
- MTD quarterly updates explained
- What business records to keep
- Allowable expenses for sole traders
- The VAT registration threshold explained
- Keeping records in spreadsheets: bridging software explained
Sources
All checked on 19 October 2026.
- Find out if and when you need to use Making Tax Digital for Income Tax (updated 26 March 2026)
- Work out your qualifying income for Making Tax Digital for Income Tax (updated 11 September 2026)
- Create digital records (updated 16 July 2026)
- Send quarterly updates (updated 16 October 2026)
- Submit your tax return (updated 16 July 2026)
- Choose the right software for Making Tax Digital for Income Tax (updated 13 July 2026)
- Find software that works with Making Tax Digital for Income Tax
- Making Tax Digital for Income Tax: digital record-keeping direction (updated 27 March 2026)
- Business records if you’re self-employed