Making Tax Digital from April 2027

Making Tax Digital (MTD) for Income Tax has applied since April 2026 to sole traders and landlords with qualifying income above £50,000. From 6 April 2027, the threshold falls to £30,000, bringing an estimated 1,077,000 more people into quarterly digital reporting. 

Since September, HMRC has also been signing up people in the first wave who had not acted themselves. The Budget on 28 October eased penalties for this group but did not change who is in scope or when.

Key takeaways

• From 6 April 2027, MTD applies to sole traders and landlords with qualifying income above £30,000.
• The test uses gross income on your 2025/26 tax return, not profit.
• There are no penalty points for late quarterly updates in 2027/28, but late returns and late payments are still penalised.
• Non-resident landlords exempt for 2026/27 join in this wave if their income is above the threshold.

Who is caught by the £30,000 threshold?

You are in scope if you are registered for Self Assessment, receive income from self-employment, property or both, and your qualifying income is above £30,000. Qualifying income is your gross income from both sources combined, before expenses. It tests turnover, not profit: £18,000 from a sole trade plus £15,000 in rent gives £33,000, even though neither source alone would qualify.

A tradesperson with £34,000 of sales and £20,000 of costs is therefore in scope despite a modest profit, and a landlord whose rent barely covers the mortgage can cross the line too.

Employment, pension, dividend and savings income are excluded, and if you jointly own a property, only your share of the rent counts.

Why does your 2025/26 tax return matter so much?

The April 2027 test is based on your 2025/26 figures, which go on the return due by 31 January 2027. HMRC reviews those returns and writes to people above the threshold, so the gross figures and any joint ownership need to be right.

Once you are in, you stay in unless your income remains below the threshold for three consecutive years. With the threshold due to fall to £20,000 from April 2028, few people joining next April are likely to leave.

What will actually change?

You will file your 2026/27 return in the usual way by 31 January 2028, but from 6 April 2027, you will need:

• Digital records. Income and expenses go in MTD-compatible software, or in spreadsheets linked to HMRC through bridging software.
• Quarterly updates. A summary goes to HMRC every three months, due on 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028. Each sole trade has its own update, while UK rental properties share one and foreign property is reported separately.
• A year-end tax return. For 2027/28, this is due by 31 January 2029.

How much tax you pay, and when, does not change. Quarterly updates are not payments, although the Budget confirmed that Payments on Account will move to smaller, more frequent instalments from April 2029.

Is there a grace period for late quarterly updates?

Yes. The Budget confirmed that the April 2027 group will not receive penalty points for late submission of their first four quarterly updates in 2027/28. All four must still be sent before the year-end return can be filed, so a missed update can make the return late. Late returns and late payments are penalised in full. From 2028/29, each missed deadline earns a point, and four points trigger a £200 penalty, with every late submission after that costing another £200.

The Chartered Institute of Taxation welcomed the easement but warned that a delay to penalties should not delay preparation.

Could a different business structure take you out of MTD?

Some sole traders and landlords are asking whether changing structure would avoid quarterly reporting. Broadly, there are three options:

• Incorporate. Limited companies sit outside MTD for Income Tax, but a company brings Corporation Tax, annual accounts and the cost of extracting profits. Moving property into a company can also trigger Capital Gains Tax and Stamp Duty Land Tax.
• Form a partnership or LLP. Partnerships are not yet in scope, but GOV.UK says they will be brought in at a later date, and partners’ own sole trade or rental income can still be caught.
• Stay as you are. For most people, MTD alone is not a good enough reason to restructure.

With income tax on property income in England, Wales and Northern Ireland rising to 24%, 44% and 49% from April 2027, up from 20%, 40% and 45% today, landlords may still want a wider review. Our comparison of LLPs and limited companies sets out the differences.

Are non-resident landlords affected?

Yes. Landlords who completed the SA109 residence pages on their 2024/25 return were exempt for 2026/27. That exemption ends in April 2027, so they must join if their 2025/26 qualifying income was above £30,000. For non-residents, only UK self-employment and property income counts, and anyone without a UK National Insurance number is exempt. 

Our article on the Parker residence case covers the wider residence rules. With residence status, foreign income and MTD now closely linked, it is worth reviewing your position before you file your 2025/26 return.

Who is exempt?

You can apply for an exemption if age, disability, location or religious belief makes digital record-keeping impractical. Trustees and personal representatives are exempt automatically, and the Budget deferred MTD until further notice for several specialised groups, including those eligible for qualifying care relief and those who use averaging adjustments.

What does this mean for you?

If you are a sole trader or landlord with income close to or above £30,000, there are four practical steps to take now:

• Check your 2025/26 figures before you file.
• Choose your software and agree who will prepare each quarterly update.
• Sign up yourself or through your agent rather than waiting to be signed up. HMRC says those who act first keep control of their details.
• Use 2027/28 to build the routine before penalties apply in full.

MTD is part of HMRC’s wider move to a digital tax system, which we covered in HMRC Digital by Default and first wrote about in The Making Tax Digital revolution has begun.

Frequently asked questions

Does Making Tax Digital mean I pay more tax?

No. It changes how you keep records and report your income, not how much tax you owe or when you pay it.

Can I use spreadsheets for MTD?

Yes, as long as they are linked to HMRC through MTD-compatible bridging software. You can’t simply retype figures from one place to another.

How can we help?

Every business and property portfolio is different, so the right MTD approach depends on your circumstances: the figures on your 2025/26 return, how you keep your records, and whether your current structure still suits you.

Wherever you are based, in the UK or overseas, Wilkins Southworth can confirm whether you are in scope, review your figures before you file, sign you up for MTD on your behalf and prepare your quarterly updates and year-end return. If MTD will apply to you from April 2027, speak to the team to make sure you are ready before the first deadline.