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How ‘Making Tax Digital’ Threshold Cuts Affect Sole Traders and Landlords

UK’s mandation threshold for Making Tax Digital (Income Tax) falls to £20,000 from April 2028—this article shows what it means, who’s impacted, and how to stay compliant.

By NomadicTax Research Team · 5-8 min read

What is the change?

From April 2028, the UK government will reduce the threshold for mandatory participation in Making Tax Digital (MTD) for Income Tax (ITSA) from £30,000 to £20,000 of qualifying income. This affects sole traders and landlords whose total taxable income from business or property falls between these amounts. (gov.uk)

Who’s affected?

  • Sole traders reporting business profits
  • Landlords reporting rental income
  • Those with qualifying income between £20,000 and £30,000 per tax year
  • Already in scope are those with income above £50,000 (since April 2026) and above £30,000 (by April 2027) (gov.uk)

What are the new obligations?

Those in scope must:

  • Keep digital records using software compatible with MTD ITSA
  • Submit quarterly updates of business and property income and expenditure
  • File an end-of-year declaration (instead of ad-hoc Self Assessment items where relevant) (gov.uk)

Actionable steps to prepare

  1. Check qualifying income: Add together gross income from all self-employment and property before expenses to see if you exceed £20,000.
  2. Choose suitable software: Must be MTD-compatible. Check HMRC’s published list. Costs and usability vary.
  3. Set up quarterly reporting schedule: MTD-ready software will guide you. Mistakes early on can be costly to rectify.
  4. Maintain digital record-keeping discipline: Keep receipts, invoices, and expenses organized and coded correctly.
  5. Seek professional advice if unsure about dual income sources or borderline eligibility.

Example scenario

Samantha is a landlord with annual rental income of £15,000 before expenses and a separate freelancing gig that brings in £10,000 before costs. Her total qualifying income is £25,000, so from April 2028 she must comply with MTD ITSA. She’ll need software, quarterly submissions, and plan for administrative overhead.

Benefits & challenges

Pros:

  • More regular insight into tax position; avoids huge year-end surprises
  • Better budgeting and cashflow control for small businesses and rental income
  • Encouragement to use modern digital tools, reducing errors

Cons:

  • Initial setup cost (software, training, time)
  • More frequent reporting (every quarter) vs annual only
  • Risk of penalties for late submissions or errors if systems not fully understood

Tips for smooth transition

  • Trial MTD-compatible software in advance of threshold date
  • Automate record capture (e.g., scanning receipts, direct feeds)
  • Adjust bank account routines to separate business vs personal cashflows
  • Use HMRC’s webinars or resources; attend workshops if offered
  • Review tax-planning decisions in light of more frequent reporting

Have no surprise taxable income? Start preparing now. Once April 6, 2028 hits, you'll want digital systems in place already.

Sources

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