Making Tax Digital for locksmiths

Do you need to use MTD?

MTD for Income Tax applies to sole traders and landlords. As a locksmith, your qualifying income is your total turnover from self-employment before you deduct any expenses. If this figure was more than 50,000 pounds in the 2024-25 tax year, you are in scope for 2026-27.

The threshold is tested as being strictly more than the figure. If your turnover was exactly 50,000 pounds, you are not over the threshold. If you have other property income, add it to your locksmith earnings before testing the limit.

If your qualifying income was 20,000 pounds or less in 2026-27, you have an automatic permanent exemption. You do not need to use MTD for Income Tax.

What counts as qualifying income?

Qualifying income is the total income from self-employment and property before expenses. For a locksmith, this is the gross amount you invoiced or received for services and parts, before deducting stock, van costs, or home office expenses.

Some income is not counted towards the threshold. This includes employment income through PAYE, dividends, State and private pensions, and qualifying care relief. If you are a partner in a partnership, your share is also not counted towards the individual MTD threshold.

Quarterly updates and deadlines

Once you are in MTD, you send four updates a year. These are summaries of your income and expenses by category, cumulative from 6 April. They are not tax returns. You must send an update even if you had no income or expenses in that period.

The deadlines are fixed. You can send the update from the end of the period up to the deadline, or up to 10 days before the period ends if you expect no further transactions.

You still submit your Self Assessment tax return after the tax year ends, and you pay your tax by 31 January. The quarterly updates help you keep track of your tax bill as you go.

Digital records for your trade

You must keep digital records of your income and expenses. A digital record is created and stored in compatible software. You cannot just keep paper receipts and type them in later; the record must be created digitally.

For a locksmith, this means logging every job, parts purchase, and expense as it happens. Once a record has been sent to HMRC in a quarterly update, it must not be moved by hand. You cannot cut and paste or copy and paste data between products or cells.

Keep these records for at least 5 years after the 31 January submission deadline for the tax year. This is the same period as Self Assessment.

Penalties for missed deadlines

If you miss a quarterly update deadline or the tax return deadline, you get one penalty point per missed submission. The threshold is 4 points. Once you reach 4 points, you get a 200 pound penalty, and a further 200 pound penalty each time you miss another 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.

Late payment penalties are separate. If you pay your tax late, you may face a percentage charge based on how late you are. Interest also runs from the first day the payment is late until it is paid in full.

Signing up and software

You must be registered for Self Assessment and have submitted a tax return in the last 2 years. You sign up for each income source 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.

HMRC does not provide software. You need compatible software that can create and store digital records, work with your accounting period, and send quarterly updates. An all-in-one product also submits the tax return.

You authorise the software to connect to HMRC. This authorisation needs to be repeated every 18 months without repeating the identity check.