Making Tax Digital Expands to More Self-Employed People From 6th April 2027

Tax paperwork is part of running a business or renting out a property. You need to keep track of what comes in, what you spend and the records HMRC may ask to see. HMRC is changing how some people will have to keep those records and report their income, so it is worth getting to grips with the new system before it starts.

What is changing from 6th April 2027?

Making Tax Digital for Income Tax is being brought in gradually. Sole traders and landlords with qualifying income over £50,000 joined on 6th April 2026. From 6th April 2027, the rules will also apply to those with qualifying income over £30,000.

HMRC will look at your 2025/26 Self Assessment tax return to decide whether you meet the threshold. It does not matter what you expect to earn in 2027/28. The figure is based on income before you take off business costs, not the profit you are left with. You must be registered for Self Assessment and have submitted a tax return to use the service. HMRC says it will write to people it identifies as needing to join, but you are still responsible for checking whether the rules apply and signing up.

There is another stage planned for 6th April 2028. This is expected to bring in sole traders and landlords with qualifying income over £20,000, based on their 2026/27 tax return. Partnerships are not yet included, and HMRC has not set out their start date.

How do you work out the £30,000 threshold?

For this rule, qualifying income means the money you receive from self-employment and property before taking off expenses. This is sometimes called gross income or turnover. If you run more than one business or rent out more than one property, you add the income from them together.

For example, a sole trader who receives £24,000 from freelance work and £8,000 in rental income has qualifying income of £32,000. They are over the threshold even if their business and property expenses mean their actual profit is much lower.

The threshold is strictly more than £30,000. If your qualifying income is exactly £30,000, you are not over the threshold for this phase.

What income counts?

HMRC counts gross income from your sole-trader work and property. That can include:

If you jointly own a rental property, HMRC generally counts your share of the property income, rather than the whole amount received by all the owners. There are specific rules for some jointly owned properties, so check the guidance if the amount reported to you is already after expenses.

What does not count?

Other types of income are not added to your qualifying income. These include:

For example, someone with £28,000 in sole-trader turnover and a £15,000 PAYE salary does not have qualifying income of £43,000. The salary is not included in the MTD threshold calculation. They would still need to consider any other self-employment or property income they receive.

Income from a limited company is not treated as your personal sole-trader turnover. A company director who also runs a separate sole-trader business or lets out property may still need to use Making Tax Digital if that personal qualifying income is over the threshold.

What will you have to do under Making Tax Digital?

If the rules apply to you and you do not qualify for an exemption, you will need to keep your business and rental records digitally. You will also send HMRC an update every three months. This means keeping your records up to date throughout the year, rather than sorting everything out just before your annual tax return.

1. Keep digital records of income and expenses

You will need to record business and property income and expenses in software that is compatible with Making Tax Digital for Income Tax. Each digital record must include the amount, the date the income was received or the expense occurred, and the relevant income or expense category.

You only need to create digital records for the self-employment and property income covered by the rules. Your PAYE salary, pension income and other personal income are dealt with separately when you complete your annual tax return.

This does not mean you have to send every receipt or invoice to HMRC each quarter. The software uses the records you keep to produce totals for your updates. You should still retain the supporting paperwork and evidence you need for your own records.

2. Send quarterly updates to HMRC

Every three months, your software will put together a summary of the income and expenses you have recorded. Each update covers the tax year so far, from 6th April up to the end of that update period, rather than just the previous three months. You check the figures and send the update to HMRC through the software. If you have more than one business or rental property, you may need to send a separate update for each one. HMRC receives totals for each income and expense category, not copies of your individual receipts or invoices.

These updates are not four extra tax returns. They simply tell HMRC what you have earned and spent so far. They can help you see how much tax you might owe, but your final tax bill is not worked out until you complete the end-of-year process.

For people using the standard tax-year update periods, the usual deadlines fall on 7th August, 7th November, 7th February and 7th May. The periods and dates can differ if you use a calendar-year accounting period, so check the timetable that applies to your business and property records.

3. Complete your annual tax return as usual

You will still need to complete an annual tax return. At the end of the tax year, you check your figures, correct anything that needs changed, add details of any other income and claim any tax reliefs or allowances you are entitled to.

Your tax bill does not become payable every quarter just because you are sending updates. The normal Self Assessment payment timetable remains in place, with the annual tax return and any balancing payment generally due by 31st January after the end of the tax year.

What happens if you miss a deadline? Making Tax Digital uses a points-based system for late quarterly updates and late tax returns. A late submission normally gives you a penalty point rather than an immediate fine. Once you reach the set number of points, a financial penalty can apply. Late payment of tax is dealt with separately and can still lead to a penalty. Check HMRC’s latest guidance so you understand the rules that will apply when you join.

What software will you need?

You must use software that HMRC recognises as compatible with Making Tax Digital for Income Tax. HMRC does not provide its own bookkeeping app, but it publishes information about software that has been through its recognition process. Its software finder lets you search for recognised products and check whether the software you already use is compatible.

You can choose one product that records income and expenses, sends quarterly updates and submits your annual tax return. You can also use more than one product if they work together and cover all the tasks you need to complete.

If you currently keep your accounts in spreadsheets, you do not necessarily have to abandon them. You can continue using spreadsheets if you also use compatible bridging software to connect your records to HMRC and submit the required updates and tax return. Simply keeping a spreadsheet on its own will not meet the digital reporting requirements.

Before choosing anything, check that the software supports both your self-employment and property income if you have both. It should also allow you to include other income and the adjustments needed for your annual return.

Who is exempt from Making Tax Digital?

Not everyone who is over the income threshold will have to use the system. HMRC has automatic exemptions and a separate process for people who need to apply. If you are exempt, you must still report your income through Self Assessment in the usual way.

People who are digitally excluded

You may be able to apply for an exemption if it is not reasonable for you to use compatible software to keep records, send updates or submit your tax return. HMRC gives examples including:

HMRC looks at each application on its own merits. Simply preferring paper records, not knowing how to use accounting software or finding that software costs money will not automatically qualify you for an exemption.

Other automatic exemptions

There are also exemptions for particular circumstances. Partnerships are not currently required to use Making Tax Digital for Income Tax, although a partner’s separate personal self-employment or property income may still count towards their own qualifying income.

Other automatic exemptions include people who do not have a National Insurance number before the start of the relevant tax year, people who are not physically or mentally capable of providing information to HMRC and have an appropriate legal representative in place, and certain groups identified through their tax return. These include ministers of religion, some Lloyd’s members, and people who receive or transfer Married Couple’s Allowance (if born before 6th April 1935) or Blind Person’s Allowance. The exact conditions depend on the information included in your tax return.

Some exemptions are temporary. For example, certain claims involving qualifying care relief, averaging relief, trust or estate income, or particular residence circumstances can mean you do not have to use Making Tax Digital for the 2026/27 tax year. These exemptions generally end before the April 2027 phase. If your qualifying income is over £30,000 in 2025/26, you may still need to start on 6th April 2027. Some people need to apply rather than receiving an automatic exemption, so check the exact HMRC conditions.

If you think you qualify, read HMRC’s exemption guidance and apply where required. Do not simply ignore the start date because you believe an exemption might apply.

What should sole traders and landlords do before April 2027?

Do not assume the rules do not apply just because HMRC has not written to you. Check your income and your tax return so you know whether you need to get ready.

This guide provides general information based on HMRC guidance available on 6th November 2026. It is not tax or accounting advice. Your obligations can depend on your income sources and personal circumstances, so check the latest HMRC guidance or speak to a qualified tax adviser if you are unsure.