Making Tax Digital · Sole traders
Driveway and paving contractors: heavy aggregates, plant hire, and MTD turnover thresholds
ONLY£15A MONTHLearn how paving contractors should record aggregates, plant hire, customer advances, CIS and gross turnover under Making Tax Digital.
A driveway contract can put a substantial payment through your bank while leaving a much smaller margin after blocks, aggregate, plant and labour. That difference matters when checking Making Tax Digital: the entry test generally uses gross income, before those costs.
The records should therefore show the full job price and the expenses separately. This gives you both the turnover HMRC needs and a clearer picture of whether the work was profitable.
When Making Tax Digital applies
Making Tax Digital for Income Tax changes how qualifying sole traders and landlords keep records and report income. Under HMRC’s timetable, the starting points are:
- From 6 April 2026, if qualifying income exceeded £50,000 in 2024–25.
- From 6 April 2027, if qualifying income exceeded £30,000 in 2025–26.
- From 6 April 2028, if qualifying income exceeded £20,000 in 2026–27.
Qualifying income generally means gross self-employment and property income combined, before expenses. Salary, pension income and dividends do not count towards this particular test. Check HMRC’s qualifying income guidance, including the treatment of VAT and shorter accounting periods where relevant.
The test uses the relevant earlier tax year; passing a figure during a busy month does not mean you join that day. Exemptions can apply. These rules concern your individual business and property income, rather than a limited company’s Corporation Tax reporting.
Materials supplied to the customer are part of the job
Block paving, MOT Type 1, sand, resin, tarmac and edging materials bought in your own name are normally business purchases. The amount charged to the customer for supplying them forms part of your income, even when passed on at cost.
Keep merchant invoices, delivery charges, returns and credit notes linked to the job. A material reimbursement is not automatically money collected as the customer’s agent. Where the customer genuinely buys materials directly, the arrangement and invoice should show that.
HMRC’s materials guidance explains the expense categories. Under the cash basis, eligible costs generally follow payment timing; traditional accounting can require stock and work-in-progress adjustments.
Plant hire and owned equipment
Rollers, compacting plates, saws and excavators may be hired or owned. Ordinary business hire charges and qualifying repairs need records, while refundable hire deposits should be distinguished from expenses.
Most eligible equipment purchases are deducted when paid for under the cash basis. Traditional accounting normally uses capital allowances, potentially the annual investment allowance. A finance agreement needs separate review: loan capital repayments are not additional deductions for an asset already claimed.
Section 34 of the Income Tax (Trading and Other Income) Act 2005 establishes the business purpose test. Exclude private DIY use where appropriate and keep itemised invoices for mixed purchases.
Grab lorry collections, skip hire and lawful commercial waste disposal can also be business costs. In England, check relevant waste carrier registration requirements for materials or waste you transport. Other UK nations have their own arrangements.
Worked example: turnover and profit tell different stories
Ben uses the cash basis. Assume he is VAT registered, uses VAT-exclusive figures consistently where permitted, and all the following business amounts have been received or paid. The example does not calculate VAT.
| Item | Annual amount excluding VAT |
|---|---|
| Customer receipts | £100,000 |
| Materials paid for | £42,000 |
| Plant hire paid for | £10,000 |
| Subcontract work paid for | £16,000 |
| Other allowable costs | £8,000 |
| Provisional profit | £24,000 |
The £24,000 profit is not the figure used instead of gross qualifying income for the MTD entry test. The materials and hire costs are deductions in calculating profit; they do not erase the sales from turnover.
VAT has a separate timetable and test. Compulsory VAT registration generally concerns taxable turnover over £90,000 in a rolling 12-month period, or an expectation of exceeding it in the next 30 days alone. Do not wait for an MTD review or tax-year end to check that position.
CIS depends on the contract
Driveway construction and related work can fall within the Construction Industry Scheme. A private householder is not normally a CIS contractor, but working for a building contractor can bring different obligations. You may also become a contractor yourself when paying subcontractors for construction work. See HMRC’s CIS overview.
If CIS is withheld from your payment, record gross income and the deduction separately as tax already paid, rather than reducing turnover or treating it as an expense. Keep the payment and deduction statement and reconcile it to the bank receipt.
If you pay subcontractors, check employment status, verification and the applicable deduction rate. Monthly CIS reporting is separate from your quarterly MTD updates. Where VAT also applies, review the conditions for the construction domestic reverse charge; it does not apply to every paving invoice.
Advance payments and job reviews
Under the cash basis, ordinary customer advances generally count when received, including money intended to fund material orders. Keep a separate job budget showing what still needs to be paid and delivered. A tax receipt is not necessarily spare cash.
Review supplier credits, retained hire deposits and final customer balances at each job’s close. Avona AI can support categorisation, while contract and merchant records explain material costs, plant charges and any CIS adjustments.
A manageable quarterly routine
For a business using standard tax-year periods, the 2026–27 quarterly update deadlines are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027. Updates are cumulative: each covers the tax year so far. Calendar update periods are also available, with the same deadlines.
Keep digital income and expense records, reconcile them regularly and send the required totals through compatible software. The Income Tax (Digital Obligations) Regulations 2026 underpin the requirements; HMRC’s digital record-keeping notice explains the applicable directions. A bank feed needs supporting detail wherever a payment conceals fees, private purchases or several transactions.
Normally, record the transaction date, amount and relevant category, retaining supporting invoices or receipts. HMRC’s digital records guidance explains permitted simplifications and digital links where more than one software product is used.
Quarterly updates do not replace the annual tax return. The 2026–27 return is due by 31 January 2028, and normal tax payment dates continue. HMRC is not applying late quarterly update penalties for 2026–27, but digital records and updates are still required. That first-year approach does not waive other filing or payment obligations.
Keep the full contract visible
Complete turnover and clear job costs make MTD easier to manage alongside site work. Explore Avona.app at £15/month, or Avona Concierge, managed by chartered accountants, starting from £60/month, for ongoing support with construction accounts.