Tax Planning
Tax Planning for 2028: Preparing for Lower MTD-ITSA Thresholds
With Making Tax Digital for Income Tax Self-Assessment thresholds set to drop, sole traders and landlords need solid strategies now to avoid headaches later.
By NomadicTax Research Team • 5-8 min read • August 15, 2026
## What’s Changing in MTD-ITSA Thresholds
From **6 April 2026**, sole traders and landlords whose trading or property income exceeds **£50,000** must use Making Tax Digital for Income Tax Self-Assessment (MTD-ITSA): keep digital records, submit quarterly updates, and file their annual return via compatible software. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai))
Then, from **6 April 2027**, that threshold falls to **£30,000** income. ([gov.uk](https://www.gov.uk/government/publications/extension-of-making-tax-digital-for-income-tax-self-assessment-to-sole-traders-and-landlords/making-tax-digital-for-income-tax-self-assessment-for-sole-traders-and-landlords?utm_source=openai))
## Why You Should Act Early
* Moving gradually lets you trial software and processes without full pressure.
* It reduces risk of non-compliance penalties, especially if quarterly updates are unfamiliar.
* Helps manage cash flow by aligning payments more regularly with income.
## Action Steps Now
1. **Assess whether you meet or will meet the thresholds**
Use prior year income to predict upcoming year. If over £30,000, even if optional, preparing beforehand avoids last-minute stress.
2. **Choose MTD-compatible software**
Look for tools that support quarterly submissions and integrate with bank feeds and expense tracking. Examples: FreeAgent, QuickBooks, or Dext. Test before required.
3. **Establish good record keeping**
Even if you’re under threshold now, digital organisation (receipts, invoices, property income diaries) pay off.
4. **Plan for cash flow changes**
Quarterly reporting means you’ll need to estimate tax liabilities more often. Budget accordingly—anticipate paying quarterly instalments or adjusting savings.
5. **Seek professional advice if you have multiple income streams**
Property + self-employment + investment income complicates forecasting. Advice now saves corrections later.
## Example Case
**Scenario**: Leanne is a landlord with £35,000 income, and runs a side-business making craft goods bringing in £18,000.
* In 2026-27, her property income pushes her over the 2027 threshold of £30,000, so she should begin using MTD-ITSA early.
* Leanne picks software, organises receipts, forecasts tax due by combining incomes.
* When the April 2027 requirement hits, she’s already in compliance and avoids scrambling.
## Common Pitfalls & How to Avoid Them
| Problem | Solution |
|---------|----------|
| Under-estimating income growth | Review previous years, anticipate increases, err on side of caution |
| Relying on manual record keeping | Transition sooner—use phone apps, bank feeds, scanning tools |
| Forgetting non-trading income | Include property, dividends, interest when forecasting |
| Missing software deadlines | Always check latest guidance—listings of accredited software are maintained on GOV.UK |
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By planning ahead, individuals impacted by the falling MTD-ITSA thresholds can keep control of their tax affairs, avoid penalties, and make the transition as seamless as possible.