Overview
The UK government is expanding the Making Tax Digital (MTD) for Income Tax regime. Legislation now confirms that, from 6 April 2028, the income threshold for mandatory participation will reduce from £30,000 to £20,000 in gross combined income from self-employment and property. This change brings around 970,000 more individuals into scope. (gov.uk)
MTD in Phases: Who When
| Tax Year | Threshold | Effective Date |
|---|---|---|
| 2024-25 | £50,000+ | 6 April 2026 |
| 2025-26 | £30,000+ | 6 April 2027 |
| 2026-27 | £20,000+ | 6 April 2028 |
If your qualifying income in a previous year exceeds the listed threshold, you must use MTD-compatible software, keep digital records, send quarterly updates, and file annual returns online. (gov.uk)
What Gross Combined Income Means
- Self-employment income (before expenses)
- Rental (property) income
- Excludes allowances, deductions, losses—based purely on gross receipts from those categories.
(gov.uk)
Key Requirements & Grace Periods
- Must use compatible digital software
- Send summaries every quarter to HMRC
- At end of year, submit final return by 31 January following the tax year
- First MTD year (2026-27) will not penalise occasional missed quarterly update deadlines (late submissions will trigger penalty points, but no £200-plus fine until 4 points are accrued) (gov.uk)
Who Benefited & When You Must Join
If you are a sole trader/landlord with income over £50,000 in the 2024-25 tax year → joined in April 2026.
If you exceed £30,000 in 2025-26 → mandate starts April 2027.
If you exceed £20,000 in 2026-27 → mandate starts April 2028.
(gov.uk)
Examples
- Martina owns one rental property and earns £22,000 rent, plus freelance self-employment income of £1,000: gross combined = £23,000 → mandatory from 6 April 2028.
- Oliver has self-employment income £35,000 in 2024-25 → currently under MTD from April 2026.
- Priya has £25,000 in self-employment and £3,000 in property income in year 2025-26 → threshold £30,000 applies; she’ll need to join April 2027.
Benefits & Risks
Benefits:
- Better tracking of income & expenses year-round
- Fewer last-minute scrambles at year end
- Reduced risk of late filing penalties
Risks:
- Using non-compliant software or missing deadlines could lead to penalty points later
- Underestimating cumulative income could force earlier inclusion than expected
- Digital record-keeping demands accuracy and proper storage of receipts
Action Plan
- Calculate past gross income to see when you’ll be brought into scope
- Choose digital-record software in advance
- If using an agent, discuss how they plan to support you for MTD
- Put in place record-keeping systems: income, expenses, property records, bank feeds
- Monitor guidance published by HMRC for updates or exemptions
Conclusion
Lowering the threshold to £20,000 by April 2028 is a big change—bringing many sole traders and landlords into legal obligation for digital reporting. Planning now will help smooth the transition, avoid penalties, and take full advantage of the efficiencies and insights that MTD offers.