What’s Changing When?
Starting 6 April 2028, the threshold to mandate Making Tax Digital for Income Tax Self Assessment (MTD-ITSA) will be lowered from £30,000 to £20,000 total qualifying income. This affects sole traders and landlords whose combined self-employment and property income falls between these thresholds. (gov.uk)
Who Will Be Affected?
- Sole proprietors and landlords who currently report income between £20,000-£30,000. Approximately 970,000 additional individuals are expected to come into scope. (gov.uk)
- Those currently exempt or voluntary participants under MTD-ITSA because their income is below prior thresholds. |
New Obligations Under MTD-ITSA
Once in scope, you will need to:
- Keep digital records of all income and expenses related to trade or property using software compatible with MTD rules. Spreadsheets may be used with bridging software. (gov.uk)
- Submit quarterly updates to HMRC reflecting your digital records, plus the annual final return. (gov.uk)
- File and pay by standard deadlines (e.g. January following the tax year end). |
Impact and Costs
The government estimates:
- Transitional costs of about £380 million, mostly setup and familiarisation. (gov.uk)
- Annual ongoing compliance costs rising by about £101 million, as those newly mandated adjust. (gov.uk)
- For many, costs may include software subscriptions, hardware upgrades, or paying agents. |
Action Plan: How to Be Ready Now
- Assess your income – calculate your combined property + trading income for recent years to see if you will be above the new £20,000 threshold.
- Review current record keeping – do you use paper or spreadsheets? If so, begin exploring MTD-compatible software or bridging solutions that work with spreadsheets. |
- Plan your cash flow – quarterly reporting means you need to track income and expenses closely throughout the year, not just at year-end. |
- Seek advice – especially for property income or mixed income types, talk to an accountant or agent familiar with MTD-ITSA. |
- Budget for costs – allocate budget for software, training and possibly agent fees. |
Example Scenario
Emily lets two properties and runs a small baking business; her total qualifying income is currently £25,000 annually. Under the new rules, from 6 April 2028, she'll need to use digital record keeping, send quarterly updates and her annual return through MTD-compatible software. She decides to switch to a bookkeeping app with bridging tools now to avoid scrambling in 2028. |
Bottom line: If your income edges close to or exceeds £20,000, it’s wise to start preparing now. Digital systems, accurate records, and planning ahead will help you comply and avoid penalties or surprises.