Making Tax Digital for Income Tax: are you affected from April 2027?
Making Tax Digital (MTD) for Income Tax is the biggest change to Self Assessment in decades. It started in April 2026 for people with income over £50,000, and from April 2027 it reaches many more sole traders and landlords.
What is Making Tax Digital for Income Tax?
Instead of filing one tax return a year, people within MTD must:
- keep digital records of their business and property income and expenses, using HMRC-recognised software
- send HMRC a summary update every three months (quarterly updates)
- submit a final declaration by 31 January after the end of the tax year, to confirm their figures and finalise their tax
Your tax bill isn't calculated differently. What changes is how you keep records and how often you report to HMRC.
When does it apply to you?
It depends on your qualifying income: your combined gross income from self-employment and property, before expenses.
| From | Applies if your qualifying income is over |
|---|---|
| 6 April 2026 | £50,000 |
| 6 April 2027 | £30,000 |
| 6 April 2028 | £20,000 |
HMRC looks back at an earlier tax return to decide whether you're in. For April 2027, it's based on the income on your 2025/26 tax return, the one due by 31 January 2027.
Important: the test uses your turnover, not your profit. A delivery driver who earns £32,000 but has £10,000 of expenses still has qualifying income of £32,000, so would be in MTD from April 2027.
Who does it affect?
- Sole traders (self-employed individuals)
- Landlords who own property in their own name
- people who are both, as the income from both is added together
It doesn't currently apply to limited companies or partnerships. Income from employment (PAYE) or dividends doesn't count towards the threshold.
What you need to do now
- Check your income. Add up your self-employed and property income for 2025/26. If it's over £30,000, you'll likely be in from April 2027.
- Choose MTD-compatible software. We include Xero free with all our packages, and it's recognised by HMRC for MTD.
- Get into the habit of digital records. Using software from the start of the tax year makes quarterly updates simple.
- Keep an eye out for HMRC letters. HMRC writes to people it thinks will need to join.
What if you miss a quarterly update?
MTD uses a points-based system for late submissions. Each late quarterly update earns a penalty point, and once you reach the threshold you'll get a financial penalty. Late payment of tax is penalised separately. Keeping your records up to date as you go is the easiest way to stay clear of points.
How we can help
We'll check whether and when MTD applies to you, set you up on Xero, show you how to use it, and submit your quarterly updates and final declaration for you. It's all covered in one fixed monthly fee.
Want us to handle it for you?
Fixed monthly fees, unlimited advice and no minimum contract. Get your price in 30 seconds or talk to a qualified accountant.
This article is general guidance based on the rules in place when it was written (October 2026). Tax rules change and everyone's situation is different, so please speak to us before making decisions.