Compliance
MTD Threshold Lowering: What Sole Traders & Landlords Need to Know
HMRC is extending the Making Tax Digital requirements—sole traders and landlords with lower income thresholds will soon face digital record-keeping obligations.
By NomadicTax Research Team • 5-8 min read • June 13, 2026
## What is MTD and What’s Changing
“Making Tax Digital for Income Tax Self Assessment” (MTD ITSA) requires qualifying individuals—sole traders and landlords—to maintain **digital records** and submit **quarterly updates** to HMRC using compatible software. From **6 April 2026**, it’s mandatory for those with income over **£50,000**. That threshold drops to **£30,000** in April 2027, and further to **£20,000** in April 2028.([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-self-assessment-reducing-the-mandation-threshold-from-30000-to-20000-from-april-2028/reduction-of-the-mandation-threshold-from-30000-to-20000-from-april-2028?utm_source=openai))
## Why Thresholds Are Being Lowered
Lowering the threshold is part of a government plan to **modernize UK tax administration** and reduce errors in Self-Assessment. The policy aims to bring more businesses and landlords under digital rules so that records are accurate, return errors are reduced, and tax collection is improved. Around **970,000 additional individuals** will come into scope with the £20,000 threshold.([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-self-assessment-reducing-the-mandation-threshold-from-30000-to-20000-from-april-2028/reduction-of-the-mandation-threshold-from-30000-to-20000-from-april-2028?utm_source=openai))
## Who’s Affected & Who’s Exempt
- **Impacted**: Sole traders and landlords whose combined property and business income exceeds the new thresholds.
- **Exemptions/deferrals**: Ministers of religion, Lloyd’s underwriters, those with Blind Person’s Allowance, power of attorney arrangements, and non-UK resident entertainers may be deferred until **April 2029** or permanently exempt from digital obligations.([gov.uk](https://www.gov.uk/government/publications/making-tax-digital-for-income-tax-and-penalty-reform?utm_source=openai))
## What You Need to Do
- **Get compliant software** ready. If your income is near the thresholds, test it and move early.
- **Digital record-keeping**: maintain records of income, expenses, invoices digitally.
- **Quarterly updates** to HMRC, plus final return annually.
- **Plan for cashflow**: having more frequent reporting often means earlier payment or estimation of tax owed.
## Example Scenario
*Sarah* is a landlord with rental income (£25,000/year) and small side self-employment (£5,000/year). Total qualifying income £30,000. Under the 2028 thresholds, she’d be required to use MTD ITSA—maintain digital accounting, submit quarterly summaries, and use MTD-compatible software from April 2028. Up till then, she remains outside scope, unless income thresholds are crossed earlier.
## Key Upcoming Dates
- 6 April 2026: **£50,000 threshold** in force.
- 6 April 2027: Threshold drops to **£30,000**.
- 6 April 2028: Threshold drops to **£20,000**, bringing most smaller businesses under digital tax obligations.
## How to Prepare
- Review your qualifying income for past year.
- Choose **MTD-compatible software early**—many providers offer free trials.
- Keep good records from now—don’t wait until compulsory threshold hits.
- Watch for HMRC guidance—especially for exemptions.
## Conclusion
The lowering of thresholds for Making Tax Digital reflects a long-term shift in UK tax administration. While it increases compliance requirements, early planning and software adoption can help individuals absorb the changes smoothly—and avoid penalties down the line.