Making Tax Digital for Income Tax is arriving in stages from April 2026, and for sole-trader cafe, takeaway, pub and restaurant operators it is the most significant change to how Self Assessment works since it launched. This post gives a plain answer to the question most operators are asking: does this apply to me, from when, and what does it actually require?
The short answer: who is in scope and from which date
If you operate as a sole trader and your combined gross income from self-employment and property exceeds £50,000, you are required to use Making Tax Digital for Income Tax from 6 April 2026. If it exceeds £30,000, you are in scope from 6 April 2027. If it exceeds £20,000, you are in scope from 6 April 2028.
| Qualifying income (gross, self-employment + property combined) | Qualifying income year | Mandatory from |
|---|---|---|
| Over £50,000 | 2025 to 2026 | 6 April 2026 |
| Over £30,000 | 2025 to 2026 | 6 April 2027 |
| Over £20,000 | 2026 to 2027 | 6 April 2028 |
| £20,000 or below | Not currently mandated | No confirmed date |
Each threshold pairs with the qualifying income measured in a specific preceding tax year. The £50,000 trigger looks at whether your 2025-26 qualifying income exceeded that figure. The £30,000 trigger also looks at 2025-26 income. The £20,000 trigger looks at 2026-27 income. HMRC's eligibility checker confirms this staircase.
Does MTD for Income Tax apply to your business?
The regime applies to individuals who pay Income Tax through Self Assessment, specifically sole traders and partners in unincorporated partnerships. It does not apply to limited companies, which pay Corporation Tax under a separate regime (see the limited-company section below).
Most sole-trader cafe, takeaway, pub and single-site restaurant operators file Self Assessment returns already. If that describes your business, your first question is whether your qualifying income meets the relevant threshold for your in-scope year. Income here means gross turnover, before expenses. A takeaway with £55,000 in sales and £40,000 in costs still has £55,000 of qualifying income for MTD purposes.
Partnerships are in scope under the same staircase. If you run a food business jointly with a partner without a limited company, check with your accountant how the partnership's income is treated for each partner's qualifying income calculation.
The income threshold and how qualifying income is measured
The most common misunderstanding is that the threshold is a profit test. It is not. Qualifying income is the combined gross turnover from self-employment (all your sole-trader businesses, not just hospitality) plus gross rental income from property, before any deductions for expenses, capital allowances or reliefs.
If you run a sole-trader takeaway and also receive rent from a flat you own, both streams count together. A takeaway with £35,000 in food sales and a flat bringing in £8,000 in rent has £43,000 of qualifying income. That is below the £50,000 threshold for April 2026 but above the £30,000 threshold for April 2027.
Do not conflate this with the VAT registration threshold of £90,000. MTD for Income Tax and MTD for VAT are separate regimes with different thresholds and different mechanics. Being VAT-registered does not mean you are automatically in scope for MTD for Income Tax, and crossing the MTD income threshold does not trigger a VAT registration obligation.
The start-date staircase: over £50k, £30k, £20k
The government has confirmed three steps, each with a specific date and a specific qualifying-income figure to measure against.
From 6 April 2026: operators whose qualifying income (self-employment plus property, gross) in the 2025-26 tax year exceeded £50,000 must use MTD-compatible software from that date. This is the first mandatory wave. A cafe turning over £60,000 a year is in this group. There is no grace period once the date arrives.
From 6 April 2027: operators whose qualifying income in the 2025-26 tax year exceeded £30,000 must comply. This sweeps in a large number of sole-trader food businesses that operate below £50,000 but generate meaningful turnover. A takeaway with £38,000 annual income from the business will be in scope from this date even if they were not required to act in 2026.
From 6 April 2028: operators whose qualifying income in the 2026-27 tax year exceeded £20,000 must comply. At this point, most actively trading sole-trader hospitality businesses will be in scope. The only operators outside the mandate at this stage will be those with qualifying income at or below £20,000, which typically means a part-time or small-scale operation.
Getting the staircase right matters. The mistake to avoid is assuming the £30,000 trigger looks at 2026-27 income when it actually looks at 2025-26 income. If your turnover has been above £30,000 for the past two years, you are in scope from April 2027 regardless of what happens to your income between now and then.
What you must actually do: digital records, software, quarterly updates, final declaration
MTD for Income Tax replaces the annual Self Assessment return process with a different rhythm. There are four elements.
Digital records
You must keep your business records in digital form using MTD-compatible software. Every transaction needs to be recorded digitally. A written cash book or a manually updated spreadsheet that is not linked to an approved submission tool does not meet the requirement.
MTD-compatible software
HMRC maintains a list of software products that meet its compatibility requirements. The software must be capable of receiving your records, calculating your income and expenses, and submitting data directly to HMRC through the MTD system. Many accountancy software packages used in hospitality already have MTD modules; check with your provider whether your current tool is on the approved list.
Quarterly updates
Four times a year, you send a summary of your income and expenses to HMRC through your software. The quarters follow set periods (April to June, July to September, October to December, January to March). Each update is not a tax payment; it is a digital report. HMRC uses these to build a running picture of your tax position. Late or missing updates may attract penalties under the new penalty regime.
Final declaration
After the tax year ends, you submit a final declaration through your software. This is the equivalent of the current Self Assessment tax return: it settles your full tax position for the year, including any adjustments, reliefs or additional income streams not covered in the quarterly updates. Your January 31 payment deadline does not change.
What this means day to day in a food business
Hospitality businesses have three bookkeeping characteristics that make MTD preparation slightly different from a service-sector sole trader.
Cash sales and EPOS data. A food business often takes a large proportion of its income in cash or through a point-of-sale system that logs transactions individually. MTD requires those sales to be captured digitally. If you already use a modern EPOS system that exports to your accounts software, the connection is straightforward. If you still summarise daily takings in a cash book, you will need a process for getting those figures into compliant software before your in-scope date.
Mixed VAT supply complexity. A takeaway with hot and cold food, eat-in and delivery, and possibly alcohol has VAT coding that runs across multiple rates. When your quarterly update summarises income, that income needs to be correctly categorised at source. Jumbling standard-rated and zero-rated sales together in your MTD records will produce incorrect data upstream. See our guide on hospitality VAT returns and schemes for how to structure your VAT coding before MTD arrives.
Supplier receipts capture. Food and drink purchases, cleaning materials, equipment repairs and small tools all need to be recorded digitally. Many operators currently batch receipts into a shoebox and process them at year-end. MTD makes quarterly reconciliation a minimum standard. Receipt capture apps integrated with accounts software solve this for most businesses; the setup cost is low and the time saving at quarter-end is material.
What about cash basis? Your accounting method under MTD
MTD for Income Tax does not change how you account for income and expenses. Since 6 April 2024, cash basis has been the default accounting method for unincorporated businesses, including sole-trader hospitality operators. You record income when you receive it and expenses when you pay them. Accruals accounting remains available by election.
MTD requires you to record transactions digitally and send quarterly summaries to HMRC, but it does not prescribe whether you use cash or accruals. The choice of method sits alongside MTD, not inside it. For a fuller treatment of which method suits a stock-heavy food business, see our companion post on cash basis versus accruals for hospitality operators.
If you are a limited company
Limited companies pay Corporation Tax, not Income Tax, and are outside the scope of MTD for Income Tax entirely. The staircase above, and all the quarterly update obligations, apply only to individuals: sole traders and partners.
Companies operating in hospitality are subject to Corporation Tax at 19% on profits up to £50,000 and 25% on profits above £250,000, with marginal relief between those figures. A separate regime called MTD for Corporation Tax has been in development, but it has no confirmed mandation date. There is no date to plan around for CT-MTD at this time. If you operate through a limited company, your accountant should be tracking that separately; it is not addressed here.
If you are considering whether to remain a sole trader or incorporate, the MTD compliance picture is one of several factors: a sole trader above the £50,000 threshold is in MTD from April 2026, while a company with the same profit level faces no MTD obligation yet. That is not a reason on its own to incorporate, but it is worth noting in the overall comparison.
Getting MTD-ready without the panic
Operators who wait until their in-scope date to think about MTD typically face a compressed scramble: choosing software, migrating records, learning a new submission rhythm and potentially fixing a year of poorly structured bookkeeping data all at once. The operators who find the transition easiest are those who started their digital records practice a full year before the mandate hit.
The practical checklist is short. Work out your qualifying income from the last two tax years to confirm which wave you land in. Check whether your current accounts software is MTD-compatible; if you use manual spreadsheets or a cash book, that changes now. Set up a receipt-capture process that feeds into your software rather than a bag of paper. And run through at least one practice quarter before your first mandatory submission date.
If bookkeeping is currently handled in spare hours between services, the quarterly update rhythm is also an opportunity to review margins more regularly. Operators who see their income and cost data every three months tend to catch problems (food cost creep, a rate category applied incorrectly) faster than those who see it once a year.
For help choosing software, structuring your digital records and managing the quarterly submissions around a busy kitchen or bar schedule, see our hospitality bookkeeping and accounts service. We work with sole-trader operators across all hospitality sub-trades and can confirm your in-scope date, set up compliant software and handle the quarterly submissions so you are not spending the end of each quarter on government portals.