Making Tax Digital for Income Tax started in April 2026 for sole traders and landlords with more than £50,000 of income. From 6 April 2027 the threshold falls to £30,000, and in April 2028 it falls again to £20,000. If you file a self assessment return and have business or rental income, it is worth checking now whether next April applies to you.
How the £30,000 test works
The test uses your qualifying income: your gross self-employment turnover plus your gross rental income, before any expenses. It is not your profit.
For the April 2027 start, HMRC looks at the figures on your 2025/26 tax return, the one due by 31 January 2027. If the combined figure is more than £30,000, you are in from 6 April 2027.
A sole trader with £22,000 of turnover who also receives £10,000 of rent from a flat has £32,000 of qualifying income, even if the profit on both is a fraction of that. Salary, pensions, dividends and interest do not count towards the test, and nor, for now, does income from a partnership.
What changes
Instead of one return a year, you will need to:
- keep your income and expense records digitally, in software that works with MTD
- send HMRC a summary every quarter, by 7 August, 7 November, 7 February and 7 May
- submit a final return by 31 January after the tax year ends, as now
The quarterly updates are a summary of income and expenses only. They do not change when you pay: payments on account and the January balancing payment stay as they are.
A softer first year for April 2027 joiners too
People who joined in April 2026 have had a softer first year, with no penalty points for late quarterly updates in 2026/27. The Budget on 28 October 2026 extended the same easement to those joining in April 2027: no penalty points for late submission of the first four quarterly updates in 2027/28. Late payment penalties still apply, so the tax itself must be paid on time.
After that first year, each late update earns a point, and once you reach four points you are charged £200, with a further £200 for each late filing after that until your record is clean again. Late payment penalties are also tightening, rising to 4% of the unpaid tax at 15 days late and a further 4% at 30 days from April 2027.
What to do before April
- Check your figure. Add up the turnover and gross rents on your 2025/26 return. If you are close to £30,000, look at it carefully before you file.
- Choose your software. If the business already runs on Xero or a similar package, it will handle MTD. If you keep a spreadsheet, you will need bridging software or a move to proper bookkeeping software.
- Get the records current. You cannot send a quarterly summary for transactions you have not recorded. The first update for 2027/28 is due by 7 August 2027.
- Sign up. HMRC has been writing to people it expects to be in scope, but the obligation is yours whether or not a letter arrives. If you genuinely cannot use digital tools, you can apply to HMRC for an exemption.
How we can help
We can check whether you are caught, set up the software, and either file the quarterly updates from records you keep or keep the records for you. See how Making Tax Digital works with us, or get in touch if you are not sure where you stand.
Updated 29 October 2026 for the Budget on 28 October 2026.
