MTD for Plumbers: Guide to Compliance and Avoiding Penalties

Qualifying Income for MTD for Plumbers

Your qualifying income is the total gross income (turnover) generated from your business activities before any expenses are deducted. This total includes all income from your plumbing business as well as rental income from property you own (if any), as both are considered when determining whether you meet the threshold for Making Tax Digital for Income Tax.  

For e.g. If your plumbing business earned £50,000 gross during 2024-25 and you also received £8,000 in rental income from a property you let out, your total qualifying income for MTD purposes would be £58,000. This total is calculated based on gross income before subtracting any allowable business expenses. Since this combined income exceeds the £50,000 threshold, you will be required to start using Making Tax Digital from April 2026. 

What MTD for Plumbers Means in Practice?

Digital Record-Keeping Requirements 

You must maintain digital records of your plumbing business income and expenses using MTD-recognised software. This includes: 

Income Records: 

• Invoices for completed jobs 

• Cash and card payment receipts 

• Subcontracting payments received 

• Emergency call-out fees 

• Any other plumbing-related income 

If you also earn rental income from property, this must be recorded separately in your digital records. 

Expense Records: 

• Materials and parts (pipes, fittings, boilers, etc.) 

• Tools and equipment 

• Van expenses (fuel, insurance, repairs, servicing) 

• Business premises costs 

• Professional fees and subscriptions 

• Insurance premiums 

• Marketing and advertising costs 

• Training and qualifications 

Also, Expenses related to rental properties also be recorded separately from your plumbing business expenses to ensure clear reporting and compliance with MTD. 

Quarterly Update Submissions 

Instead of filing one annual tax return, you'll submit quarterly updates to HMRC showing your income and expenses for each quarter.

Standard Quarter Option

The deadlines are typically: 

Alternative Calendar Quarter Option 

You also have the option to submit updates based on calendar quarters instead of standard tax year quarters. This can be useful if your business prefers reporting aligned with the calendar year. Whichever period you choose, deadlines are same for both quarters. The deadlines for calendar quarters are: 

Important: Whichever option you choose, you must remain consistent throughout the year and submit each quarterly update using MTD-recognised software. These updates form the basis for your final Income Tax calculation, which is submitted once per year. 

Cumulative Submissions 

When submitting quarterly updates under MTD, you must submit cumulative records. This means each quarterly submission should include: 

• Income and expenses from the start of the tax year up to the end of the current quarter, not just that quarter alone. 

• For example, when submitting Quarter 2 (6 July – 5 October), you report all income and expenses from 6 April to 5 October. 

• This ensures HMRC has an up-to-date running total of your business activity throughout the year and simplifies your final annual Income Tax submission. 

Annual Final Declaration 

By 31 January following the end of the tax year, you must submit your final annual declaration to HMRC. This completes and finalises your tax position for the year and confirms the total tax you owe. Alongside the figures already reported in your quarterly updates, the final declaration includes all other income sources not covered during the year (such as bank interest, dividends, employment income, pensions, or partnership income), as well as claims, reliefs, and allowances you are entitled to. 

Choosing the Right Software for Your Plumbing Business 

As a plumber, you need software that's practical for your working style and handles the specific challenges of your trade. 

Software Options for Plumbers 

Record-Creating Software  

This type of MTD software for plumbers lets you: 

• Link to your business bank account to import transactions automatically 

• Scan receipts using your phone camera (perfect for those material receipts from merchants) 

• Send quarterly updates and annual returns to HMRC 

Bridging Software  

If you prefer using spreadsheets to track your jobs, income, and expenses, bridging software can connect your existing records to HMRC's systems. This might suit plumbers who already have a spreadsheet system that works for them. 

Key Features to Look For 

When choosing MTD software for your plumbing business, ensure it: 

✓ Allows receipt scanning via smartphone (essential for on-the-go recording)  

✓ Handles cash payments (many plumbers still receive cash for smaller jobs)  

✓ Tracks mileage automatically or easily  

✓ Manages multiple expense categories relevant to plumbing  

✓ Works on mobile devices for job site access  

✓ Offers bank feed integration  

✓ Provides quarterly update reminders  

✓ Fits your budget (some free options available with restrictions) 

MTD Penalties for Plumbers: What You Need to Know 

Late Submission Penalties 

MTD introduces a points-based penalty system for late submissions that applies to both quarterly updates and annual returns. 

How the Points System Works 

For Annual Returns: 

• You receive one penalty point for each late annual return 

• After accumulating two points, you'll face a £200 penalty 

• Each subsequent late annual return triggers another £200 penalty 

For Quarterly Updates:  

Once quarterly update penalties come into effect (after 2026-27), the system works differently: 

• You receive one penalty point for each late quarterly update 

• After accumulating four points, you'll face a £200 penalty 

• Each subsequent late quarterly update triggers another £200 penalty 

Resetting Your Penalty Points to Zero 

The good news is that penalty points don't accumulate indefinitely. Your points can be reset to zero if you maintain good compliance. 

For Annual Filing Obligations: Your penalty points reset to zero if: 

• All submissions have been made on or before the due date for a 24-month period 

• AND all submissions that were due in the preceding 24 months have been received by HMRC 

Example: If you received one penalty point for a late annual return in January 2027, this point will be cleared if you submit your next two annual returns on time (by January 2028 and January 2029). 

For Quarterly Filing Obligations: Once quarterly penalties begin (after 2026-27), your penalty points reset to zero if: 

• All submissions have been made on or before the due date for a 12-month period 

• AND all submissions that were due in the preceding 24 months have been received by HMRC 

Example: If you received two penalty points for late quarterly updates in 2027-28, these points will be cleared if you submit all four quarterly updates on time throughout the entire 2028-29 tax year. 

Late Payment Penalties 

Late payment penalties are particularly harsh under MTD: 

• 3% penalty if tax remains unpaid 15 days after the due date (from April 2027; increases to 4%) 

• Additional 3% penalty if still unpaid after 30 days (From April 2027; increases to 4%) 

• 10% annual interest on unpaid amounts after day 30 

First-Year Payment Extension 

For plumbers joining MTD in their first mandated year, there's an additional 15-day grace period, giving you 30 days total before the first late payment penalty is charged (instead of the usual 15 days). 

This only applies during your first year in MTD: 

• For those joining in April 2026, this grace period applies throughout 2026-27 

• After your first year, the standard 15-day deadline applies 

Critical Tip: These penalties apply on top of standard interest charges. Set up a Time-to-pay arrangement with HMRC before the deadline to avoid penalties if you're struggling to pay. 

Are You Exempt from MTD for Plumbers? 

Some plumbers may qualify for exemptions from MTD requirements. 

Automatic Exemptions 

You're automatically exempt if you: 

• Don't have a National Insurance number 

• Are submitting returns as a trustee or personal representative 

Digital Exclusion Exemption 

You may apply for an exemption if you're "digitally excluded," meaning it's unreasonable for you to use compatible software because: 

• Age, disability, or health condition prevents you from using digital systems 

• You cannot access the internet at home or work due to your location 

• Religious beliefs are incompatible with digital communications 

Note: The following reasons are NOT accepted for exemption: 

• Previously filing paper returns 

• Being unfamiliar with accounting software 

• Having few digital records to create 

• Extra cost or time required for MTD compliance 

Practical Tips for Plumbers Transitioning to MTD 

Start Early 

Don't wait until you're mandated to join MTD. Getting familiar with the software and digital record-keeping now will make the transition smoother. 

Digitise Your Current System 

If you currently use paper records or basic spreadsheets: 

• Take photos of all receipts immediately using your phone 

• Set up a simple folder structure for different expense categories 

• Consider investing in a card reader to reduce cash transactions 

Separate Business and Personal Finances 

Open a dedicated business bank account for your plumbing work. This makes tracking income and expenses significantly easier and provides a clear audit trail. 

Track Mileage Religiously 

Mileage is often a plumber's largest deductible expense. Use apps or your software's mileage tracker to log: 

• Travel to job sites 

• Trips to suppliers for materials 

• Business-related journeys to merchants or trade counters 

Record Expenses Immediately 

Get into the habit of recording expenses as soon as they occur. Snap photos of receipts from builders' merchants immediately, even before leaving the car park. 

Reconcile Weekly 

Set aside 30 minutes each week to review your transactions, categorise expenses, and ensure nothing is missing. This prevents a quarterly scramble. 

Consider Professional Help 

If you're not confident with technology or accounting, hiring a bookkeeper or accountant experienced with MTD can be cost-effective. They can handle: 

• Software setup and training 

• Quarterly update submissions 

• Tax planning advice 

• Annual return completion 

Conclusion 

Making Tax Digital represents a significant change for plumbers, but it doesn’t change how much tax you pay—only how and when you report it. By understanding your qualifying income, keeping accurate digital records, and submitting quarterly updates on time, you can stay compliant and avoid costly penalties. Choosing the right software and building simple habits, like recording expenses immediately and reconciling regularly, will make MTD far easier to manage alongside your day-to-day plumbing work. 

The key to success under Making Tax Digital for plumber is preparation. Starting early gives you time to adapt your processes, get comfortable with digital tools, and seek professional support if needed. With the right approach, MTD can improve your financial visibility, cash flow planning, and overall business organisation, helping your plumbing business remain compliant, confident, and ready for the future. 

Frequently Asked Questions