A working life example: MTD for construction workers
Meet Russ, a self-employed electrician based in Leeds. He works on a mix of domestic and commercial jobs – rewiring houses, fitting lighting in offices, and the occasional long-term site contract.
Like many people in construction, Russ’ income isn’t the same every month. Some months are busy, others are quieter. He often pays for tools, materials and fuel upfront, and gets paid later. Sometimes that payment lands in his bank account. Sometimes it’s cash. And sometimes he uses his personal card for expenses without thinking.
This day-to-day reality doesn’t change under Making Tax Digital (MTD). But the way Russ keeps track of it does.
What stays the same under MTD
MTD doesn’t change how Russ works or how he runs jobs.
He’s still:
Sending invoices
Buying materials, tools and fuel
Getting paid in a mix of bank transfers, card payments and cash
Juggling busy months with quieter ones
Dealing with Construction Industry Scheme (CIS) deductions if he works as a subcontractor (more on that further down)
In short: the work stays the same. What changes is how the information about his income is recorded and sent to HMRC.
What changes under MTD
Keeping digital records (and what that actually means)
Under MTD for Income Tax, Russ needs to keep digital records of his trade income and expenses.
Basically that means:
Keeping a record of what he’s been paid
Keeping a record of his work-related expenses
And storing that information in HMRC-recognised software (rather than just paper, spreadsheets saved on his laptop, or a folder full of receipts)
A digital record isn’t anything fancy, it’s simply a list showing:
Income: who paid him, how much, and when
Expenses: work supplies he’s paid for like materials, tools, fuel and van insurance
What about cash payments or personal cards?
This is very common in construction and MTD allows for it.
Cash payments: if Russ is paid in cash, he still records the amount in his digital records, even though it didn’t go through a bank account.
Personal card payments: if he buys something for work using his personal card, he records that expense too, as long as it’s genuinely for the business.
MTD isn’t about forcing everyone to use one payment method. It’s about making sure all income and expenses are recorded digitally.
Quarterly updates to HMRC
Instead of sending everything to HMRC once a year, MTD means sending quarterly updates.
Each update is simply a summary of:
Total income for that quarter
Total allowable expenses for that quarter
These updates:
Only focus on his trade as an electrician
Don’t include things like savings interest or capital gains
Aren’t a tax bill
Don’t need adjusting for every allowance or relief
They’re there to give HMRC a rough, running picture of how he’s doing across the year.
Seeing this information more regularly can also help people like Russ avoid nasty surprises at the end of the tax year, because income and expenses aren’t being worked out from memory months later.
CIS and MTD: what construction workers need to know
If Russ works as a subcontractor under the Construction Industry Scheme (CIS), contractors may deduct tax from his payments before he’s paid.
Under MTD:
Russ still records his full income for the work he’s done (not just what lands in his bank)
CIS deductions are still taken into account when he submits his tax return at the end of the year
So while quarterly updates focus on income and expenses, CIS is properly squared up when everything’s pulled together at year end.
At the end of the tax year
Once the tax year finishes, Russ submits his tax return.
This is the point where he:
Checks the information from the year
Includes other income (like interest or gains, if he has them)
Claims allowances and reliefs
Checks that any CIS tax already taken off has been allowed for
Finalises his position with HMRC
Even though updates have been sent during the year, this end-of-year step is still where everything’s confirmed.
What this looks like in real life
MTD doesn’t turn Russ into someone who suddenly loves admin. Receipts still end up shoved in his back pocket, and some weeks he barely thinks about tax at all.
But compared to the old way:
Records are built up as the year goes on, not reconstructed months later
HMRC gets regular summaries, not one big annual dump
There’s less reliance on guesswork, memory and last-minute stress
How this could work with Monzo
If Russ has a Monzo business bank account, much of his income and expenses will already flow through one place.
That means:
Bank payments in and out are already visible digitally
He can add cash income or personal card expenses when needed
Monzo’s built-in MTD software – which is free to use and HMRC recognised – will then use that information to send the required quarterly updates and support the end-of-year tax return.
You can file tax straight from Monzo to HMRC, ready for HMRC’s new rules coming in April 2026. Apply for a free business bank account to get on the waitlist.
Only sole traders or limited company directors in the UK can apply. Ts&Cs apply.
We can’t give tax or financial advice – you’ll need to speak to a professional adviser for that. But if you’d like to understand more about MTD, including who it applies to and when, you can read more in this article.