Making Tax Digital (MTD) for Income Tax is already underway, but from April 2027, more sole traders and landlords will be required to follow the rules. With the qualifying income threshold reducing from £50,000 to £30,000, could you be affected?
Making Tax Digital isn’t a new concept. HMRC has been introducing digital tax reporting in stages, with MTD for VAT already established and MTD for Income Tax beginning in April 2026 for sole traders and landlords with qualifying income over £50,000.
The next phase starts on 6 April 2027, when the Income Tax threshold reduces to £30,000.
This means more self-employed individuals and landlords will need to keep digital records and submit regular updates to HMRC, rather than relying solely on their annual Self Assessment tax return.
So, what’s changing, and what should you be doing now?
Who will be affected by Making Tax Digital in 2027?
From 6 April 2027, MTD for Income Tax will generally apply to sole traders and landlords whose combined qualifying income exceeded £30,000 in the 2025/26 tax year, unless an exemption applies.
Importantly, qualifying income means your gross income from self-employment and property, before deducting expenses. It isn’t the same as your profit.
For example, if you earned £22,000 from self-employment and received £12,000 in gross rental income, your combined qualifying income would be £34,000.
Even though neither income source individually exceeds £30,000, you could still fall within the new requirements.
What’s changing from April 2027?
The main change is who needs to comply, rather than a completely new set of reporting rules.
Those who joined MTD for Income Tax in April 2026 are already required to maintain digital records and submit quarterly updates. From April 2027, these same requirements will extend to more sole traders and landlords.
If you’re joining MTD for the first time, you’ll need to:
- Keep digital records: Record relevant income and expenses using compatible software.
- Submit quarterly updates: Provide HMRC with summaries of your income and expenses throughout the year.
- Complete your year-end tax return: Finalise your tax position through compatible software.
It’s also worth noting that quarterly updates don’t mean you’ll automatically have to pay Income Tax four times a year. The usual Self Assessment payment arrangements remain in place.
What if you have more than one source of income?
If you receive both self-employment and rental income, you’ll generally need to keep separate digital records and submit quarterly updates for each type of business activity.
However, this doesn’t mean landlords need to submit separate updates for every property they own. For example, if you rent out three properties as part of one UK property business, these would generally be reported together rather than individually.
The key distinction is between different business activities, not necessarily every individual source of income.
What if your income is below £30,000?
If your qualifying income is £30,000 or less, you generally won’t be required to join MTD in April 2027 solely because of that income.
However, the rollout doesn’t stop there.
The threshold is scheduled to reduce again to £20,000 from April 2028, based on qualifying income for the 2026/27 tax year.
Even if you’re not affected by the next phase, it’s worth keeping an eye on your income and understanding how the changes could affect you in the future.
How can you prepare for Making Tax Digital 2027?
Although the requirements are already in place for some taxpayers, those joining in April 2027 still have time to get organised.
Here are four things you can do now.
- Check your qualifying income
Review your self-employment and property income for the 2025/26 tax year to establish whether you’ll be affected by the reduced threshold.
- Review how you keep your records
If you’re still relying on paper records or spreadsheets, consider whether your current approach will meet the digital requirements.
- Choose suitable software
You’ll need compatible software to maintain digital records and submit information to HMRC. It’s worth reviewing your options before the deadline approaches.
- Speak to your accountant
Understanding what applies to your circumstances now can help you prepare without unnecessary last-minute pressure.
Frequently asked questions
Is Making Tax Digital compulsory from April 2027?
Yes, for sole traders and landlords who meet the qualifying income requirements and aren’t exempt. If you were already required to join from April 2026, the existing obligations continue.
Does Making Tax Digital apply to limited companies?
MTD for Income Tax does not apply to a limited company’s Corporation Tax reporting. However, individuals who receive qualifying self-employment or property income may still be affected.
Will I need to submit four tax returns a year?
No. You’ll submit quarterly updates of your income and expenses, alongside your year-end tax return. Quarterly updates are not four separate annual tax returns.
How can Barrons help?
With Making Tax Digital already underway and more people joining in April 2027, now is a good time to make sure you’re prepared.
At Barrons, we can help you understand whether the reduced threshold affects you, review your existing bookkeeping arrangements, and ensure you have suitable digital accounting systems in place.
Whether you’re already using Making Tax Digital or preparing to join for the first time, our team can help you manage the requirements and stay on top of your reporting.
Not sure whether you’ll be affected in April 2027? Contact the Barrons team, and we’ll help you understand your next steps.
