Understanding the Threshold Shift
The UK government has announced that from 6 April 2028, the mandation threshold for Making Tax Digital (MTD) for Income Tax will be lowered from £30,000 to £20,000 in qualifying gross income (business + property sources). (gov.uk) This change won’t impact those already above £30,000 until 2027, but it will bring approximately 970,000 additional individuals into mandatory digital reporting. (gov.uk)
Who’s Affected and When
| Category | Current Mandate Threshold | New Threshold & Start Date |
|---|---|---|
| Sole traders / landlords with qualifying income over £50,000 | Mandatory from 6 April 2026 | Already in scope |
| Those with income between £30,000–£50,000 | Mandated from 6 April 2027 | Already committed |
| Those with income £20,000–£30,000 | Voluntary now or not in scope yet | Mandated from 6 April 2028 |
Small-scale businesses still have options to opt in voluntarily before mandate takes effect. (gov.uk)
Compliance Requirements: Software & Reporting
Once you’re in scope, these are the key obligations:
- Maintain digital records of income and expenses using MTD-compatible software. (gov.uk)
- Submit quarterly updates of business and/or property income and expenses. (gov.uk)
- Complete a final annual return (End Period Statement) to reconcile accounts. (gov.uk)
Guidance clarifies rules for jointly let properties, foreign property income, and whether profits share from partnerships count as qualifying income. (gov.uk)
Penalties & Support
The new system includes:
- A points-based penalty regime for late or missed quarterly updates or annual submissions. (assets.publishing.service.gov.uk)
- More differentiated penalties for late payments tied to timing and amount. (assets.publishing.service.gov.uk)
- HMRC will write to taxpayers ahead of obligation dates to help with preparation. (assets.publishing.service.gov.uk)
Actionable Steps You Can Take Now
- Check your qualifying income: Add up your gross business + rental income to see if you’ll fall into a new threshold band by 2028.
- Review current software systems: Ensure your accounting package is MTD-compatible, or plan to migrate.
- Get organised with record-keeping: From Q1 2026, if you’re mandated, quarterly updates require items like income, expenses, etc., in digital form. Build routine now.
- Stay informed about exemptions and reliefs: Some taxpayers may be exempted or have simplified reporting — read HMRC guidance. (gov.uk)
- Factor additional time into your workflows: With quarterly methods, timing becomes more frequent.
Example Scenario
Sophie lets one property and runs a small online shop. Her combined gross income in 2027-28 is £28,000.
- Under the current regime, she won’t be obliged to use MTD until April 2028. However, it's voluntary earlier.
- She must make quarterly updates for both property and business income once in scope.
- By keeping proper records ahead of that date, she avoids scrambling when the mandate hits.
By planning now, and understanding the timeline and requirements, landlords and sole traders in the £20,000-£30,000 band can ensure smooth adaptation to the expanded MTD system.