Making Tax Digital · Sole traders
Dressmakers and tailors: fabric stock, sewing machines, and tracking fittings under MTD
ONLY£15A MONTHLearn how dressmakers and tailors can record fabric, sewing equipment, home studio costs, customer deposits and quarterly Making Tax Digital updates.
A bridal order may begin with an advance payment, involve several fabric purchases and finish months later after the final fitting. Meanwhile, small alterations are paid for and collected on the same day.
That mix makes it useful to keep a job record alongside your tax records. Making Tax Digital does not require every project to begin and end within one quarter. It requires the financial transactions to be recorded correctly as your business operates.
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.
Fabric and haberdashery costs
Fabric, linings, thread, zips, buttons, interfacing and other materials bought for customer work can be allowable business costs. Keep the purchase invoice and identify the job or business stock where useful.
If you buy fabric and supply it as part of the finished garment, the customer’s payment normally forms part of your turnover, including any amount described as a materials reimbursement. Record the fabric cost separately. Where the customer supplies their own fabric, your income may simply be the making or alteration fee.
HMRC’s materials and stock guidance explains the general categories. Under the cash basis, eligible materials are generally deducted when paid for. Traditional accounting considers stock and work in progress where relevant, so unused rolls and partly completed orders can affect the accounts differently.
Keep returns and supplier credits with the original purchase. A private sewing project is not a business expense because its materials came from your usual trade supplier.
Sewing machines and workshop equipment
Industrial sewing machines, overlockers, coverstitch machines, steam equipment and cutting tables can qualify for tax relief. Their treatment depends on your accounting method and how they are acquired.
Under the cash basis, most eligible business equipment is deducted when paid for. Traditional accounting normally uses capital allowances, potentially including the annual investment allowance. Depreciation in the accounts is not itself a tax deduction.
Retain finance agreements as well as supplier invoices. A monthly payment may be rent, a hire purchase instalment or repayment of an ordinary loan. Loan capital does not create a second deduction for equipment already accounted for.
Routine servicing, needle replacements, belts and repairs are useful separate records. They help you track the cost of keeping an older machine running and distinguish maintenance from acquiring a new asset.
Home studio utilities and mixed use
Section 34 of the Income Tax (Trading and Other Income) Act 2005 requires a business purpose. HMRC’s guidance explains why private expenditure must be excluded.
If you work at home, calculate a reasonable business share of eligible household costs or consider the simplified homeworking rates. The flat rates are £10, £18 or £26 a month according to qualifying hours; business telephone and internet costs can be considered separately.
For actual costs, your use of the room, hours and equipment can help explain the allocation. Do not automatically claim the entire electricity bill because the machine is used daily. A substantial conversion or extension is also different from ordinary household running costs and needs separate assessment.
Worked example: a made-to-measure order
Sofia uses the cash basis and is not VAT registered. A customer pays £600 on 20 March towards a £1,200 garment. Sofia pays £260 for fabric and £40 for haberdashery that month. The remaining £600 is paid on collection on 20 April.
| Transaction | March | April |
|---|---|---|
| Customer receipts | £600 | £600 |
| Materials paid for | £300 | £0 |
| Result before other costs | £300 | £600 |
The ordinary advance fee is recorded when received under the cash basis. Sofia does not move it into April simply because the garment is finished then. These months cross the usual tax-year boundary, so the exact receipt and payment dates matter.
Her separate order record shows the agreed price, advance received, fittings and remaining balance. That record supports customer service and debt collection without changing the cash-basis timing.
Deposits, cancellations and alterations
The word “deposit” can describe different arrangements. An ordinary part-payment for work is different from a genuinely refundable security sum held for another purpose. Read the terms and record any later refund with the original order reference.
For small cash alterations, issue or retain a clear record and include the receipt when paid. Banking the cash later is a transfer of money already recorded. For card payments, keep the gross takings and processing fees identifiable rather than recording only the net settlement.
Review incomplete orders regularly so advance payments do not get mistaken for money freely available to spend. Avona AI can support categorisation, while the order record explains the fabric purchase, customer receipt and remaining commitment.
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 financial detail alongside the craft
Clear orders, material costs and payment dates make reporting much easier to follow. Avona.app is £15/month for self-service use. Avona Concierge, managed by chartered accountants, starts from £60/month if you would prefer ongoing support with the accounts.