Overview
From 6 April 2028, sole traders and landlords with total qualifying income between £20,000 and £30,000 will be mandatorily required to use Making Tax Digital (MTD) for Income Tax Self Assessment. This policy extends digital record-keeping and quarterly reporting obligations to approximately 970,000 additional taxpayers. (gov.uk)
Key Requirements
- Digital records: All income and expenses must be kept in compatible software or via a valid bridging tool if spreadsheets are still used. (gov.uk)
- Quarterly updates: Provide HMRC with income and outgoings every three months. (gov.uk)
- End-of-year return: Finalise the tax return based on these updates and any non-business income. (gov.uk)
Actions You Should Take Now
- Evaluate your current accounting: Are you using spreadsheets? If yes, assess whether you need bridging software or a full featured solution.
- Check software compatibility: Look for HMRC-endorsed software or those that advertise compliance with MTD-ITSA requirements.
- Plan for familiarity costs: HMRC estimates £380 million in transitional costs among those moving into scope. (gov.uk)
- Consult with agents or accountants: They can help setup systems and may manage the quarterly submissions for you.
Impacts & Considerations
- Compliance cost: While costs are estimated to rise for those newly in scope, most established businesses should be familiar with MTD compliance procedures. (gov.uk)
- Time management: Quarterly updates require regular attention; irregular income may complicate estimates.
- Benefit of digitalisation: Improved accuracy, fewer errors, and smoother HMRC interactions are key positives. (gov.uk)
Example Scenario
Sarah lets out two small properties and has a hobby business making jewellery. Her combined gross income from these sources in a tax year is £25,000. As of April 2028, she will be required to keep digital records and submit quarterly updates under MTD-ITSA. If she waits, she risks non-compliance penalties.
MDT threshold reduction is a signal that digital compliance is here to stay, and smaller income levels will not escape the requirement. If you're in this income band, the sooner you adapt, the smoother your tax year will be.
Category: Compliance