UK Tax Update | October 2026
Making Tax Digital 2027: Rules for Sole Traders and Landlords Earning Over £30,000
Making Tax Digital for Income Tax is due to become mandatory for another group of UK taxpayers from 6 April 2027. Sole traders and landlords whose qualifying gross income exceeded £30,000 in the 2025 to 2026 tax year will generally need to use compatible software to maintain digital records and send quarterly updates to HM Revenue and Customs (HMRC).
HMRC issued a reminder on 5 October 2026 urging affected taxpayers to prepare ahead of the April 2027 start date. The change affects how income and expenses are recorded and reported. It does not introduce a new income tax rate, and it does not mean that someone with £30,000 of turnover automatically owes tax on that entire amount.
The most important first step is to check the correct income threshold. HMRC uses qualifying income from self-employment and property before expenses and tax allowances are deducted. If a person receives both types of income, the relevant amounts are combined when checking the threshold.
Key details at a glance
- Start date: 6 April 2027 for the group covered by the £30,000 threshold
- Relevant income year: 2025 to 2026 Self Assessment tax return
- Threshold: Qualifying income above £30,000
- Who is affected: Eligible sole traders and individual landlords already within Self Assessment
- Income calculation: Combined gross self-employment and property income before expenses
- Main requirement: Digital records and quarterly updates using compatible software
- Annual tax return: Still required through the Making Tax Digital process
- Tax payment deadline: The usual Self Assessment payment deadline generally remains 31 January after the tax year
- Next planned threshold stage: Qualifying income above £20,000 from April 2028, based on the applicable previous-year figures
What is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax is an HMRC system that changes how eligible self-employed people and landlords keep records and report income. Instead of relying only on a traditional annual Self Assessment return, taxpayers within the system must keep specified records digitally and send regular summaries through compatible software.
The system is being introduced in stages according to qualifying income. The first group became subject to the rules from April 2026. The next group, with qualifying income above £30,000, is scheduled to join from April 2027. A further reduction in the threshold is planned for April 2028.
Making Tax Digital is primarily a change in record keeping and reporting. It does not, by itself, replace the existing rules for calculating taxable profits, claiming allowable expenses or determining how much Income Tax is due.
Who must use Making Tax Digital from April 2027?
The April 2027 phase generally covers individuals who meet all the relevant conditions, including being within Self Assessment, receiving qualifying income from self-employment or property, and having qualifying income above £30,000 based on the relevant 2025 to 2026 tax return.
| Taxpayer situation | Likely position |
|---|---|
| Sole trader with qualifying income above £30,000 in 2025 to 2026 | Generally required to use Making Tax Digital from 6 April 2027, subject to the applicable rules and exemptions. |
| Landlord with qualifying property income above £30,000 | Generally required to use Making Tax Digital from 6 April 2027, subject to the applicable rules and exemptions. |
| Person with £18,000 self-employment income and £15,000 property income | Combined qualifying income is £33,000, so the threshold may be exceeded. |
| Person with qualifying income of exactly £30,000 | The threshold is more than £30,000, so exactly £30,000 does not exceed it. |
| Person with qualifying income below £30,000 | Not normally required under the April 2027 threshold alone, although later thresholds or individual circumstances may change the position. |
These examples explain the threshold rather than replace an individual HMRC assessment. Special rules, exemptions, changes in income sources and the information on a submitted tax return can affect when a person needs to join.
Does the £30,000 threshold mean profit or turnover?
This is one of the most important details for sole traders and landlords. The qualifying income threshold is based on gross income from self-employment and property before business expenses and tax allowances are deducted. It is not simply the taxable profit shown after costs.
For example, a sole trader may receive £38,000 in sales and spend £12,000 on allowable business costs. The profit before other tax adjustments would be £26,000, but the qualifying income figure used for the Making Tax Digital threshold could still be £38,000.
For a landlord, the relevant property income is considered before deducting allowable expenses. A landlord receiving £32,000 in qualifying rental income may therefore exceed the threshold even if repairs, insurance and other costs substantially reduce the eventual taxable profit.
Where a person has both self-employment and property income, the qualifying amounts are added together. Income from employment or pensions does not form part of this particular qualifying income calculation, although those sources may still need to be reported under the normal tax rules.
Example: a sole trader who also rents out a property
- Gross self-employment income: £24,000
- Gross qualifying property income: £12,500
- Combined qualifying income: £36,500
The combined figure is above £30,000. If the relevant tax return and other conditions bring the individual into the April 2027 phase, they will generally need to use Making Tax Digital for Income Tax from that date.
Which tax return does HMRC use?
For the April 2027 group, HMRC uses qualifying income reported for the 2025 to 2026 tax year to determine whether the £30,000 threshold is exceeded. That is why taxpayers should review the figures on the relevant Self Assessment return rather than rely only on an estimate of current earnings.
HMRC may contact people it identifies as needing to join the system. However, taxpayers should not assume they are outside the rules simply because they have not received a letter. They should check their own qualifying income, consider any exemptions and follow the official guidance.
If income sources have stopped or changed since the relevant return was submitted, specific rules may apply. HMRC guidance explains when a ceased income source still counts and when a taxpayer should notify HMRC about changes before the next tax year. Check the official qualifying income guidance if the circumstances are not straightforward.
What records must sole traders and landlords keep digitally?
Taxpayers within Making Tax Digital must use compatible software to create and preserve digital records for their relevant business and property income. The exact records depend on the type of activity, but they generally cover income received and expenses incurred.
Records for sole traders
- Sales and other business income
- Business expenses and purchase records
- Dates and values for relevant transactions
- Supporting information needed to explain the figures reported to HMRC
- Corrections to digital records where errors are identified
Records for landlords
- Rental income received from relevant properties
- Allowable property expenses and related transaction details
- Records needed to distinguish property income and expenses
- Digital information required for quarterly property updates
- Records supporting adjustments and year-end tax calculations
Keeping a spreadsheet or accounting file may be part of a compliant process, but taxpayers must ensure the complete process meets HMRC requirements. Where information is transferred between products, compatible bridging or other software may be needed to preserve the required digital links. Simply storing photographs of paper receipts does not automatically satisfy every digital record-keeping requirement.
How do quarterly updates work?
Eligible taxpayers must send quarterly summaries of their business and property income and expenses through Making Tax Digital compatible software. These updates provide HMRC with regular information during the tax year rather than waiting until the annual return is submitted.
Quarterly updates are not four separate final tax returns. They are summaries of digital records. Taxpayers must still complete the end-of-year process, confirm relevant information and submit the required tax return through the Making Tax Digital system.
| Reporting period | What to do |
|---|---|
| Quarterly periods during the tax year | Maintain digital records and submit the relevant income and expense summary through compatible software. |
| After the final quarterly period | Review the records, make any permitted adjustments and complete the end-of-year process. |
| By the usual annual deadline | Submit the required tax return and pay any tax due under the applicable Self Assessment deadlines. |
The exact reporting dates and any applicable options should be checked against the current HMRC guidance and the taxpayer software. People with multiple income sources may need to send separate updates for different businesses or property activities, depending on the reporting arrangements.
Do landlords with jointly owned property need to comply?
Joint property ownership can make record keeping more complicated because rental income and expenses may need to be allocated between owners. A person who receives a share of qualifying property income should check whether their total qualifying income exceeds the threshold and whether the relevant joint ownership rules apply.
Joint owners should not automatically use the full rent received by all owners as their personal qualifying income. The relevant figure depends on the income attributable to the individual under the applicable tax rules. HMRC has published specific digital record-keeping directions for joint property owners and other groups.
Where a property is jointly owned, the owners should establish how their share of income and expenses will be recorded and reported before the first quarterly update. The chosen software must support the relevant record-keeping and reporting requirements.
What software do you need?
People required to use Making Tax Digital must use software compatible with the service. HMRC provides an online tool to help taxpayers check whether software they already use is suitable or find another product.
Depending on the product, software may help users record sales, rent, expenses and supporting information, prepare quarterly summaries, submit updates to HMRC and complete the year-end process. Some taxpayers may use an accountant or tax agent to manage part or all of the reporting process.
Before choosing software, check that it supports all relevant income sources, not just one business or one rental property. Confirm whether the price includes quarterly submissions, year-end reporting, support for joint property income and any required connection to HMRC.
HMRC does not require every taxpayer to buy the same software. The important point is that the selected solution must meet the relevant requirements and be suitable for the individual circumstances.
How to prepare before 6 April 2027
With the start date approaching, sole traders and landlords who may be affected should use the remaining preparation time to check their position and organise their records.
- Review the 2025 to 2026 tax return. Add up qualifying gross self-employment and property income before expenses.
- Check the threshold. If the combined qualifying figure is more than £30,000, review the April 2027 requirements and any possible exemption.
- Confirm the income sources. Make a list of each relevant business and property activity that needs to be recorded.
- Choose compatible software. Check the HMRC software finder and confirm that the product supports your circumstances.
- Organise existing records. Review invoices, receipts, rental statements, bank records and expense categories.
- Speak to your accountant or tax agent. Agree who will maintain records, send quarterly updates and complete the year-end process.
- Check registration steps. Follow the official HMRC sign-up guidance and retain confirmation of the relevant arrangements.
- Plan reporting dates. Put the quarterly reporting periods and annual tax deadline into your calendar.
Starting preparation early can reduce the risk of missing information or choosing software that does not support the required reporting process. It can also give taxpayers time to test their record-keeping routine before the mandatory start date.
What if your income is below £30,000?
If your qualifying income for the relevant period is £30,000 or less, you would not normally enter the April 2027 phase solely under the £30,000 threshold. However, this does not mean you are permanently excluded from Making Tax Digital.
The government has set out a further phase from 6 April 2028 for individuals with qualifying income above £20,000, using the relevant 2026 to 2027 tax-year information. Taxpayers whose income is close to the threshold should keep records and review official guidance as their circumstances change.
Some people may also choose to use digital tools voluntarily. If you are not required to join, the normal tax return arrangements generally continue unless you sign up voluntarily or another rule applies.
Are there exemptions from Making Tax Digital?
Not every person with qualifying income above the threshold will necessarily have to use the system. The rules include exemptions for certain circumstances, and HMRC provides a process for checking whether a person can be exempt.
Eligibility depends on the reason for requesting an exemption and the relevant HMRC criteria. Taxpayers should not assume that an exemption applies automatically because they find digital tools difficult or prefer paper records. They should review the official guidance and contact HMRC where necessary.
People whose relevant business or property income has stopped should also check the rules for ceased income sources and notify HMRC where required. A change in circumstances may affect whether they need to use Making Tax Digital for the next tax year.
Will Making Tax Digital change tax rates or payment dates?
Making Tax Digital changes how qualifying income and expenses are recorded and reported. It does not automatically increase Income Tax rates or change the basic principle that tax is calculated using the relevant taxable income and applicable allowances.
Taxpayers still need to complete the end-of-year process and pay any tax due by the applicable deadline. For many Self Assessment taxpayers, the usual deadline for paying tax due for a tax year remains 31 January after that tax year ends. Quarterly updates should not be confused with quarterly payments of Income Tax.
People should check their personal tax position separately, especially if they have other income, payments on account, capital gains or adjustments that affect the final bill.
What happens if you do not comply?
Taxpayers who are required to use Making Tax Digital must follow the digital record-keeping and reporting obligations unless an exemption applies. Missing a required submission or failing to maintain compliant records can lead to compliance issues and may result in penalties under the rules in force.
The consequences depend on the obligation, the circumstances and any applicable penalty framework. Taxpayers should consult current HMRC guidance rather than rely on unverified penalty figures shared online.
If you think you should be exempt, or you cannot meet the requirements because of your circumstances, contact HMRC and follow the formal process. Do not simply ignore a notification or assume that a software problem removes the legal obligation.
Frequently asked questions
1. When does Making Tax Digital start for people earning over £30,000?
The relevant phase starts on 6 April 2027 for eligible sole traders and landlords whose qualifying income exceeded £30,000 in the 2025 to 2026 tax year.
2. Is the £30,000 threshold based on profit?
No. Qualifying income is generally the gross income from self-employment and property before business expenses and tax allowances are deducted.
3. What if I earn £20,000 from trading and £15,000 from rent?
Your combined qualifying income may be £35,000, which is above the threshold. Check the figures and individual circumstances using the official HMRC guidance.
4. Do I need to send a tax return every quarter?
You need to send quarterly summaries through compatible software. You must also complete the required end-of-year tax return process. Quarterly updates are not four separate final tax returns.
5. Do I need to pay tax every quarter?
Quarterly updates are reporting obligations, not automatically quarterly Income Tax payments. The normal tax payment rules continue to apply unless another arrangement affects your circumstances.
6. What happens if I earn exactly £30,000?
The threshold is more than £30,000. Exactly £30,000 does not exceed the threshold for the April 2027 phase, although later rules or changes in income may affect your position.
7. Can I continue using spreadsheets?
You may be able to use a spreadsheet as part of a compliant process, but you must meet HMRC digital record-keeping and submission requirements. Check whether compatible bridging software or another supported solution is needed.
8. Does rental income count if I also have a full-time job?
Qualifying property income is included in the threshold calculation. Employment salary is not part of the qualifying income total for this test, although it remains relevant to your overall tax position.
9. What if I have both a business and rental property?
Qualifying gross income from both self-employment and property is generally combined to determine whether the threshold is exceeded.
10. Will the threshold fall again?
Yes. The published timetable provides for a further phase from April 2028 for eligible individuals with qualifying income above £20,000, based on the relevant tax-year figures and rules.
Official HMRC sources
Use official guidance to check your eligibility, calculate qualifying income, select compatible software and complete the sign-up process.
- HMRC: Sole traders and landlords earning more than £30,000 urged to act now — announcement published on 5 October 2026 about the April 2027 start date.
- GOV.UK: Before you use Making Tax Digital for Income Tax — overview of the timetable and preparation steps.
- HMRC: Work out your qualifying income — explains which income counts and how the threshold is assessed.
- HMRC: Making Tax Digital step-by-step guide — instructions for checking eligibility, choosing software, signing up and reporting.
- HMRC: Digital record-keeping requirements — official information about digital records and relevant customer groups.
- HMRC: Quarterly update requirements — explains the information to be sent to HMRC each quarter.
- GOV.UK: Find compatible Making Tax Digital software — helps taxpayers identify a suitable product.
Final takeaway
From 6 April 2027, eligible sole traders and landlords with qualifying income above £30,000 in the 2025 to 2026 tax year will generally need to use Making Tax Digital for Income Tax. The threshold is based on combined gross self-employment and property income before expenses, not profit after costs. Affected taxpayers should check their return, choose compatible software, organise digital records and follow HMRC sign-up guidance before the start date.
