Making Tax Digital for Income Tax: Will the £30,000 Threshold Affect You from April 2027?

If you’re a sole trader or landlord, the next phase of Making Tax Digital (MTD) for Income Tax could change the way you keep records and report your income to HMRC.

From 6 April 2027, MTD will expand to include individuals with qualifying income of more than £30,000 from self-employment, property income, or a combination of both. For many people, this will be the first time they’ll need to keep digital records and submit updates to HMRC throughout the year, rather than relying on a single annual Self Assessment tax return.

In practical terms, your 2025/26 Self Assessment tax return will determine whether you’re required to join MTD from April 2027. That means your position may already be set.

What’s changing?

Making Tax Digital for Income Tax is transforming how many sole traders and landlords report their income to HMRC. Instead of keeping paper records and submitting one annual Self Assessment tax return, taxpayers within the regime will need to:

keep digital records of income and expenses
use HMRC-compatible software
submit quarterly updates to HMRC
complete a final year-end declaration to confirm their overall tax position.

In practice, this means moving from one annual filing to a series of digital submissions throughout the tax year — five in total.

For many taxpayers, this represents a significant change in how bookkeeping is managed throughout the year, rather than simply filing a tax return each January.

The rollout is being introduced in stages:

From 6 April 2026 – qualifying income over £50,000 (based on the 2024/25 tax year)
From 6 April 2027 – qualifying income over £30,000 (based on the 2025/26 tax year)
From 6 April 2028 – qualifying income over £20,000 (based on the 2026/27 tax year)

One area that often causes confusion is the income threshold. For MTD purposes, qualifying income means your total gross income from self-employment and property before expenses are deducted. It’s your turnover or rental income — not your profit — that determines whether you fall within the regime. If you have both a business and rental income, the two figures are added together.

What does this mean for you?

Reducing the threshold from £50,000 to £30,000 will bring many more sole traders and landlords into Making Tax Digital.

For example, if you receive £18,000 in rental income and your part-time business generates £15,000 of turnover, your combined qualifying income is £33,000. Even if your actual profit is relatively modest, you’ll still fall within MTD from April 2027.

Because eligibility is based on your 2025/26 Self Assessment tax return, there’s little benefit in waiting to hear from HMRC. Reviewing your position now gives you more time to prepare and avoids unnecessary pressure closer to the deadline.

It’s also worth remembering that the transition involves more than simply buying new software. Many people will need to adapt how they keep records throughout the year, become familiar with quarterly reporting deadlines and review their existing bookkeeping processes.

HMRC has announced a temporary easing of penalty points for taxpayers joining MTD in April 2026. However, under the current rules, that easement won’t apply to businesses entering the regime from April 2027, making good preparation even more important.

What should you do now?

Although April 2027 may seem some way off, preparing early will make the transition much easier. We recommend that you:

Calculate your qualifying income for the 2025/26 tax year by combining your gross self-employment and property income.
If your income is close to or above £30,000, assume you’ll join MTD from April 2027 and start planning now.
Choose HMRC-compatible software that’s appropriate for your business or property portfolio.
Move to digital record-keeping early, giving yourself time to become familiar with the new reporting process.
Understand the new reporting timetable, with quarterly updates due by 7 August, 7 November, 7 February and 7 May each year.
Speak to your accountant to confirm whether MTD applies to you and ensure you’re fully prepared.

At J. Dauman & Co., we’re already helping clients prepare for Making Tax Digital. By the time the £30,000 threshold takes effect, we’ll have supported businesses and landlords through the first phase of the rollout and can guide you through every step of the transition.

Frequently asked questions

Is the £30,000 threshold based on profit?

No. The threshold is based on gross qualifying income, not profit. Expenses aren’t deducted when determining whether you fall within Making Tax Digital.

I have rental income and a small business. Are they counted together?

Yes. Your gross property income and self-employment turnover are combined. This catches many people who assume each income source is assessed separately.

Do I need to join MTD if I only receive rental income?

Potentially, yes. If your gross property income exceeds the relevant qualifying income threshold, or when combined with self-employment income exceeds it, you’ll fall within the Making Tax Digital regime.

What counts as qualifying income?

Qualifying income includes gross income from self-employment and UK property before expenses are deducted. It’s your total turnover and rental income that matters, not the profit you make after costs.

Will I still complete a tax return?

You’ll still confirm your tax position each year, but the process changes. Instead of submitting a single annual Self Assessment return, you’ll provide quarterly updates through compatible software before completing a final year-end declaration.

What if my income falls below £30,000 later?

Once you’re within Making Tax Digital, the rules governing when you can leave the regime are separate from the entry threshold. If your circumstances change, it’s worth taking professional advice before assuming you no longer need to comply.

Preparing for Making Tax Digital

Making Tax Digital represents one of the biggest changes to Income Tax reporting in recent years. While April 2027 may still seem some way off, businesses and landlords who prepare early will find the transition far more straightforward.

Not sure whether you’ll be affected?

Our team can calculate your qualifying income, confirm whether you’ll need to join Making Tax Digital and help you prepare well before the April 2027 deadline. We’ll recommend the right software, support your transition to digital record-keeping and manage your quarterly reporting, giving you confidence that you’re fully prepared.