From April 2027, HM Revenue and Customs will bring a second, much larger group of sole traders and landlords into Making Tax Digital for Income Tax. If your combined income from self employment and property was more than £30,000 in the 2025/26 tax year, this article is about you. The first wave of MTD, covering people earning over £50,000, has already been live since April 2026, and the early experience of that group gives a useful preview of what is coming for everyone above £30,000.
Disclaimer: This article is for general information only and reflects HMRC guidance current as of September 2026. The rules for Making Tax Digital for Income Tax continue to be refined, and specific details such as penalty treatment for newly mandated taxpayers may change. Always seek specific advice for your individual circumstances.
This article explains exactly who the £30,000 threshold catches, how qualifying income is actually calculated, what changes in practice once you are mandated, and the steps CoreAcc Accountants recommends taking well before April 2027 arrives.
1. A Quick Recap: What Making Tax Digital for Income Tax Actually Is
Making Tax Digital for Income Tax, often shortened to MTD for ITSA, replaces the old system of one Self Assessment return submitted after the tax year has ended. In its place, HMRC requires sole traders and landlords in scope to keep digital records throughout the year and to send HMRC four quarterly updates, followed by a Final Declaration that confirms the full year's tax position.
The quarterly updates are not full tax calculations. They are running totals of income and expenses, submitted through software that is compatible with MTD. There is no tax due at the point each quarterly update is filed. The actual tax bill is still calculated and paid through the Final Declaration, due by 31 January following the end of the tax year, exactly as it is under Self Assessment today.
The change is therefore less about how much tax you pay and more about how often you report, and how those records are kept. Spreadsheets on their own no longer satisfy the requirement unless they are linked to MTD compatible bridging software.
2. The Three Thresholds and When Each One Bites
HMRC is phasing in MTD for Income Tax in three stages, based on a taxpayer's qualifying income in a specific earlier tax year. The stages are as follows.
If your qualifying income from self employment and property was over £50,000 in the 2024/25 tax year, you were required to join MTD for Income Tax from 6 April 2026. This wave is already live.
If your qualifying income from self employment and property was over £30,000 in the 2025/26 tax year, you must join MTD for Income Tax from 6 April 2027. This is the wave this article focuses on, and the 2025/26 tax year that determines it is the one running right now, ending 5 April 2026.
If your qualifying income from self employment and property is over £20,000 in the 2026/27 tax year, the government has indicated you will be required to join from 6 April 2028, subject to confirmation nearer the time.
The important point is the look back mechanism. HMRC does not look at your current income to decide whether you must join now. It looks at your qualifying income for a tax year that has already finished, using the Self Assessment return you filed for that year. This means your obligation for April 2027 is effectively being locked in by your income and property records for the year that is running today.
3. What Counts as Qualifying Income
Qualifying income is your gross income from self employment and property combined, before you deduct any expenses. It is sometimes called turnover. This is a point that catches people out, because a landlord or sole trader might think of their profit, after mortgage interest, repairs, or cost of sales, as the relevant figure. It is not. HMRC uses the gross figure.
This also means that income from more than one source is added together. If you run a small consultancy as a sole trader and you also let out a buy to let property, your qualifying income is the sole trade turnover plus the gross rental income, not each one considered separately. Many people who assume they are safely under the £30,000 threshold on either activity alone are caught once the two are combined.
Qualifying income does not include employment income taxed under PAYE, dividends, savings interest, pension income, or capital gains. If your only income is a rental property and a part time PAYE job, only the rental income counts towards the threshold.
Worked Example 1: Combined Income Pushes a Landlord Over the Threshold
Priya Sharma owns two buy to let properties in Hertfordshire, generating gross rental income of £22,000 in the 2025/26 tax year. She also does some freelance graphic design work on the side, invoicing around £11,000 in the same tax year. Individually, neither activity comes close to £30,000.
When CoreAcc Accountants reviews Priya's position, the two income sources are added together for the purpose of qualifying income: £22,000 plus £11,000 equals £33,000. Because this is over £30,000 in the 2025/26 tax year, Priya will be required to join Making Tax Digital for Income Tax from 6 April 2027, even though neither of her income sources looked like it would trigger the obligation on its own.
Worked Example 2: A Sole Trader Who Crosses the Threshold Only in One Year
Daniel Osei is a self employed IT consultant. His turnover was £27,500 in the 2024/25 tax year and rises to £31,200 in the 2025/26 tax year after taking on a new client. Because his 2024/25 turnover was under £50,000, he was not caught by the first wave in April 2026. But because his 2025/26 turnover is over £30,000, he will be required to join MTD for Income Tax from 6 April 2027.
If Daniel's turnover happens to fall back under £30,000 in a later year, he does not automatically leave MTD. HMRC's general position across MTD regimes is that once a taxpayer is mandated in, they generally stay in unless their income falls, and stays, well below the threshold, or they meet a specific exemption. This is an area where CoreAcc Accountants would review your position each year rather than assume a single year's dip in income removes the obligation.
4. What Actually Changes Once You Are Mandated
Once you are required to use MTD for Income Tax, four things change in your day to day record keeping and reporting.
You must keep digital records of your income and expenses. This does not have to mean expensive software. It can be done through MTD compatible accounting software such as Xero or QuickBooks, or through simpler bridging software that links a structured spreadsheet to HMRC's system, provided the record keeping itself is digital from the point of entry.
You must submit four quarterly updates a year. For the standard quarterly periods, updates cover 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April, each due by the 7th of the following month. These are cumulative totals of income and expenses for the period, not a tax return in miniature.
You must submit a Final Declaration after the tax year ends, by 31 January, which brings together the quarterly figures, adds any other income such as employment, dividends, or savings interest, applies your reliefs and allowances, and confirms your final tax liability. This replaces the traditional Self Assessment return, though the deadline itself and the amount of tax due are calculated in essentially the same way.
You must use software throughout, rather than a paper return or HMRC's own free online filing service, both of which are being withdrawn for anyone within MTD.
Worked Example 3: A Full Year Under MTD for Income Tax
Once Daniel from Worked Example 2 joins MTD from 6 April 2027, his first quarterly update covers income and expenses from 6 April to 5 July 2027, and is due by 7 August 2027. He submits three more updates at the same cumulative pace through the year, each using his accounting software to pull through invoices and expenses already recorded digitally. By 31 January 2029, he submits his Final Declaration for the full 2027/28 tax year, bringing in his other income and confirming the tax due, which he pays by the same date.
The quarterly discipline means Daniel has a far clearer, more current view of his tax position throughout the year than he did filing once annually. The trade off is that record keeping needs to be current every quarter, not caught up in a rush the following January.
5. Penalties and the Question of a Soft Landing
When the first wave of MTD for Income Tax launched in April 2026 for those over £50,000, HMRC introduced a transitional soft landing for the 2026/27 tax year, meaning no penalty points were issued for late quarterly updates in that specific year, although the underlying obligation to file still applied, and late payment penalties and interest on unpaid tax were not affected.
Whether the wave joining from April 2027, at the £30,000 threshold, receives an equivalent grace period for their first year has not been confirmed in the same terms. Some HMRC guidance to date suggests later waves may not automatically receive the same transitional treatment as the first group. This is exactly the kind of detail that is likely to be clarified as April 2027 approaches, and it is one we will update this article on as HMRC confirms its position.
What is already clear is the general shape of the penalty regime once it applies in full. Quarterly filers accumulate one penalty point per missed deadline, and a fixed penalty of £200 is charged once four points are reached, with a further £200 for each additional late submission after that. Separately, late payment penalties and interest continue to apply to any tax paid after 31 January, regardless of any soft landing on quarterly updates.
Given the uncertainty over whether new joiners in April 2027 will get any grace period at all, the safest approach is to plan as though quarterly deadlines will be enforced from day one.
6. Practical Steps to Take Now, Before April 2027
The 2025/26 tax year, which determines whether you cross the £30,000 threshold, is already under way. Waiting until your accountant tells you that your Self Assessment return has confirmed you are over the threshold means you will be starting your preparation with very little runway before the April 2027 deadline.
Work out your likely qualifying income for 2025/26 now, combining self employment turnover and gross property income, rather than waiting for the year to close. If you are close to £30,000, treat yourself as likely to be caught and prepare accordingly.
Move to MTD compatible software during 2026, rather than in the weeks before your first quarterly deadline. This gives you time to get comfortable with digital record keeping, resolve any data migration issues, and build the habit of recording income and expenses as they happen rather than in a single annual push.
Consider voluntary early sign up. HMRC allows eligible sole traders and landlords to join MTD for Income Tax voluntarily ahead of their mandatory date. This can be a useful way to test the quarterly rhythm with lower stakes attached, since it gives you direct experience of the process before the obligation becomes compulsory.
Review joint income and multiple income sources with your accountant now. As shown in Worked Example 1, income sources that look individually safe can combine to push you over the threshold. This is not always obvious without a proper review.
Frequently Asked Questions
Does the £30,000 threshold apply to my profit or my turnover?
It applies to your qualifying income, which is your gross turnover before expenses, not your profit. A landlord with £35,000 of gross rental income and heavy mortgage interest costs leaving very little net profit is still over the threshold, because the test looks at the income figure before deductions.
I am a limited company director. Does this affect me?
No. Making Tax Digital for Income Tax applies to individuals who are sole traders or landlords registered for Self Assessment. It does not apply to limited companies, and it does not apply to the salary or dividends a director draws from their own company in that capacity. If you are a director who also has personal rental property or a separate sole trade, those activities are assessed under MTD in the normal way.
What if my income goes up and down near the £30,000 line each year?
HMRC's approach across Making Tax Digital regimes generally assumes that once you are mandated in, you remain in unless your income falls, and stays, well below the relevant threshold, or a specific exemption applies. A single year dipping under £30,000 is unlikely on its own to remove the obligation. CoreAcc Accountants reviews this position annually for clients close to the threshold.
I already use Xero or QuickBooks for my rental property or sole trade. Do I need to do anything differently?
If your existing software is MTD compatible, much of the groundwork is already in place, though you will still need to activate the specific functionality for quarterly updates and confirm your categorisation of income and expenses matches what MTD requires. We would recommend a short review with your accountant before your first quarterly deadline rather than assuming existing settings are sufficient.
Can I still use a spreadsheet?
Only if it is linked to HMRC approved bridging software that allows the data to be submitted digitally without manual retyping. A spreadsheet used purely to calculate figures that are then typed into HMRC's online portal by hand does not meet the digital record keeping requirement once you are mandated into MTD.
What happens to my existing Self Assessment return once I join MTD?
The traditional Self Assessment return itself is replaced by the combination of quarterly updates and the Final Declaration. The overall deadline of 31 January and the way your final tax liability is calculated, including your personal allowance and any reliefs, remains essentially the same. You are changing how and when you report, not fundamentally changing how much tax you pay.
Are there any exemptions from Making Tax Digital for Income Tax?
Yes, HMRC allows exemptions in specific circumstances, including for some taxpayers who cannot reasonably use digital tools, for example due to disability, age, location, or religious belief. These exemptions require an application to HMRC and are not automatic. If you believe you may qualify, this is worth discussing with CoreAcc Accountants well ahead of your mandatory start date.
What if I only just cross £30,000 for the first time in 2025/26 and I am not currently signed up to anything?
You do not need to take action with HMRC immediately, since your obligation is based on the return you file for the 2025/26 tax year, submitted by the normal Self Assessment deadline. What matters now is getting your record keeping onto MTD compatible software during 2026, so that you are not scrambling to set up systems in the weeks before your first quarterly update is due in 2027.
What CoreAcc Accountants Can Help You With
The £30,000 threshold catches a far larger and more varied group of sole traders and landlords than the first wave of MTD did, including many people who have never had to think about digital record keeping requirements before. CoreAcc Accountants helps clients across Hertfordshire and North London work out their qualifying income well ahead of the deadline, choose and set up MTD compatible software suited to their situation, and build a quarterly filing routine that avoids last minute pressure.
Where your income comes from more than one source, such as a rental property alongside a sole trade or freelance work, we review the combined position to confirm whether and when you are likely to be mandated, rather than leaving it to guesswork. We also keep clients updated as HMRC confirms further detail on the penalty treatment for this second wave.
Get in Touch
If your self employment and property income together could be approaching £30,000 for the current tax year, now is the time to plan for April 2027, not the months immediately before it. Contact CoreAcc Accountants today to review your position.
CoreAcc Accountants is an ACCA accredited firm of Chartered Certified Accountants based in Borehamwood, Hertfordshire. This article was published in September 2026 and reflects HMRC guidance current at the time of writing. It does not constitute professional or legal advice. Always seek specific advice tailored to your individual circumstances as the legislation develops.
