Do you need to use Making Tax Digital?
The requirement depends on your qualifying income from the previous tax year. Qualifying income is your total turnover from self-employment before any expenses are deducted. For a dog walker or pet sitter, this is the total amount charged to clients, not the profit left after costs.
You must use MTD ITSA if your qualifying income was over 50,000 pounds in 2024-25. The threshold drops to over 30,000 pounds in 2025-26, and over 20,000 pounds in 2026-27. These figures are set in law by SI 2026/336 regulation 27.
The test is for income MORE than the figure. If your turnover was exactly 50,000 pounds, you are not over the threshold for the 2026-27 tax year. If you have both self-employment and property income, these are added together before testing the threshold.
What counts as qualifying income?
For most sole traders, qualifying income is the total income from self-employment and property before expenses. This is often called turnover. It does not include employment income through PAYE, dividends, State or private pensions, or qualifying care relief.
If you work as a sole trader, your income from walking dogs, sitting pets, or selling pet products counts towards the threshold. If you are a partner in a partnership, your share of partnership income is not counted towards the MTD threshold for your sole trader business, as partnerships are not in scope yet.
Quarterly updates and deadlines
If you are in scope, you must send four quarterly updates to HMRC each year. These are summaries of your income and expenses by category, not a full tax return. Each update shows the cumulative totals from the start of the tax year on 6 April.
You must send an update even if you had no income and no expenses in that period. The deadlines are fixed dates, regardless of whether you use a standard or calendar accounting period.
| Period ends | Update due by |
|---|---|
| 5 July | 7 August |
| 5 October | 7 November |
| 5 January | 7 February |
| 5 April | 7 May |
You can send your update from the end of the period up to the deadline. You can also send it up to 10 days before the period ends if you are certain there will be no further transactions. The accounting period cannot be changed after the first quarterly update has been sent.
Keeping digital records
You must keep digital records of your income and expenses. A digital record is created and stored in compatible software. For a dog walker, this means logging each walk, sitting job, or sale as it happens, or shortly after.
Once a record has been sent to HMRC in a quarterly update, it must not be moved by hand. You cannot rewrite it in another cell or copy and paste it between products. This ensures the data trail is secure and accurate.
You must keep these digital records for at least 5 years after the 31 January submission deadline for the tax year. This is the same period as Self Assessment.
Cash basis accounting
Cash basis is the default method of accounting for small businesses from 2024-25. Under this method, you record income when the money is received and expenses when the bill is paid. This is often simpler for sole traders who do not hold stock or have complex invoicing.
If you opt out of cash basis, you must use traditional accounting, which records income and expenses when they are earned or incurred, regardless of when the money moves.
Penalties for missing deadlines
From tax years after 2026-27, missing a quarterly update deadline results in one penalty point. The threshold is 4 points. Once you reach 4 points, you get a 200 pound penalty, and a further 200 pound penalty for each additional missed deadline.
For the 2026-27 tax year, there are no penalty points for missing a quarterly update deadline. However, points still apply to the tax return deadline, and you must still keep digital records and send updates.
If you are below the penalty threshold, points are removed automatically 24 months after the missed deadline. At the threshold, you need 12 months of on-time updates and returns, plus sending any outstanding items for the previous 24 months, to reset.
Signing up for MTD
You must be registered for Self Assessment and have submitted a tax return in the last 2 years to sign up for MTD. You sign up for each income source separately if you have more than one.
From September 2026, HMRC signs up anyone who needs it for 2026-27 and has not signed themselves up. This happens in stages using information HMRC already holds. You can also sign up voluntarily before you are required to.
If your business ceased before 6 April 2026, you update your details and do not need MTD ITSA, but you still file the 2025-26 tax return. If it ceased on or after 6 April 2026, you still need MTD ITSA and must send a quarterly update covering the period up to the date it stopped.