Making Tax Digital for Restaurants: What Sole Traders Need to Know

Restaurant, café, takeaway and catering owners operating as sole traders may now need to use Making Tax Digital (MTD) for Income Tax. This practical guide explains the qualifying-income thresholds, start dates and digital-record requirements, based on GOV.UK guidance checked on 13 August 2026.

When does MTD for Income Tax start?

You must use MTD for Income Tax if you are a sole trader or landlord registered for Self Assessment and your total qualifying income is above the applicable threshold. The start date depends on the qualifying income reported in an earlier tax return:

• Over £50,000 in the 2024–25 tax year: you should have started using MTD from 6 April 2026.
• Over £30,000 in the 2025–26 tax year: you must start from 6 April 2027.
• Over £20,000 in the 2026–27 tax year: you must start from 6 April 2028.

If your restaurant business operates through a limited company or partnership, these particular MTD for Income Tax rules do not apply in the same way. Speak to an adviser about the reporting obligations for your business structure.

What counts as qualifying income?

Qualifying income is your gross income before expenses and tax, not your profit. It combines income from self-employment and property. For example, if you run a restaurant as a sole trader and also receive rental income, both sources may count towards the threshold.

This distinction matters in hospitality, where food, staffing, energy and premises costs can be substantial. A restaurant may have a modest profit while its gross turnover is well above the MTD threshold.

What restaurant owners need to do

1. Check your qualifying income. Review the relevant Self Assessment return and include gross self-employment and property income.
2. Choose compatible software. Your system must be able to create and store digital records and send the required information to HMRC.
3. Keep digital records. Record business income and expenses digitally. Where HMRC’s retail sales rules apply, a retailer may record daily gross takings instead of every individual sale; the method must still meet HMRC’s requirements.
4. Send quarterly updates. Your compatible software will summarise your business income and expenses and send updates to HMRC every three months.
5. Complete your tax return. Quarterly updates do not replace the annual Self Assessment tax return.

Quarterly updates and the first year

HMRC states that it will not issue penalty points for missing quarterly-update deadlines during the 2026–27 tax year. However, all outstanding quarterly updates must still be submitted before the tax return can be filed. Other late-filing and late-payment rules can still apply, so this should not be treated as a general penalty exemption.

How SKN can help hospitality businesses

Setting up MTD is not only a software decision. Restaurant operators need a practical process that connects daily sales, card receipts, supplier invoices, payroll information and other records without creating unnecessary administration.

SKN’s MTD for Self Assessment service can help you check when the rules apply, select suitable software, organise digital records and prepare for quarterly updates. Our hospitality and catering accountants understand the commercial pressures facing restaurants, cafés, takeaways and catering businesses.

Call 0121 551 7629 or request a consultation to discuss your restaurant’s MTD position.

Official guidance

• GOV.UK: Find out if and when you need to use MTD for Income Tax
• GOV.UK: Create digital records
• GOV.UK: Send quarterly updates
• GOV.UK: Penalties for MTD for Income Tax

Information checked against GOV.UK guidance on 13 August 2026. Tax rules, exemptions and individual circumstances may vary. This article is general information and is not a substitute for professional advice tailored to your position.