If your combined qualifying income from self-employment and property was more than £30,000 in 2025/26, you will generally need to use Making Tax Digital (MTD) for Income Tax from 6 April 2027.
This means keeping digital records, using compatible software and sending quarterly updates to HMRC.
What is Making Tax Digital?
Making Tax Digital, or MTD, is HMRC's move towards a more digital system for recording and reporting income.
For Income Tax, affected sole traders and landlords need to use compatible software to:
- Keep digital records of income and expenses
- Send quarterly updates to HMRC
- Complete their year-end tax process
- Submit their tax return
- Pay any tax due
Who Needs to Use MTD From April 2027?
From 6 April 2027, Making Tax Digital for Income Tax will apply to individuals whose qualifying income was more than £30,000 in the 2025/26 tax year.
Qualifying income includes gross income from:
- Self-employment
- Property
- Both self-employment and property
The threshold is based on income before expenses, not your final taxable profit.
For example, if your business income is £38,000 and your allowable expenses are £10,000, your profit may be £28,000, but your qualifying income is still £38,000. This means MTD may apply.
The rollout is being introduced in stages:
| Tax year used for eligibility | Qualifying income | MTD starts |
| 2024/25 | More than £50,000 | 6 April 2026 |
| 2025/26 | More than £30,000 | 6 April 2027 |
| 2026/27 | More than £20,000 | 6 April 2028 |
If you have both self-employment and property income, HMRC considers the combined qualifying income when checking whether you meet the threshold.
What Changes for Sole Traders in 2027?
If you're brought into MTD from April 2027, there are several practical changes you'll need to prepare for.
1. You'll need digital records
You'll need to keep digital records of your relevant income and expenses using MTD-compatible software. You can continue using spreadsheets if they are connected through compatible bridging software.
2. You'll send quarterly updates to HMRC
Under MTD, you won't simply collect everything and submit one annual set of figures.
You'll send quarterly updates containing summaries of your digital records.
These updates give HMRC information about your business or property income and expenses during the year.
The important distinction is:
Quarterly update ≠ quarterly tax return.
You're not filing four separate Self Assessment tax returns.
You're providing HMRC with regular summaries, followed by the year-end process and annual tax return.
3. You'll still need to complete your tax return
MTD doesn't mean your annual tax obligations disappear.
You'll still need to complete the year-end process, make any necessary adjustments and submit your tax return.
HMRC's current guidance says the tax return is submitted using compatible software and the tax due is paid by 31 January following the end of the tax year.
So the process becomes more continuous rather than replacing Self Assessment entirely.
You will need MTD-compatible software, or compatible bridging software if you continue to use spreadsheets.
Can You Be Exempt From MTD?
Some people are automatically exempt or may be able to apply for an exemption, including in certain cases of digital exclusion. Check the latest HMRC guidance if you think an exemption applies to you.
A Simple MTD 2027 Preparation Checklist
If you think you could be affected from April 2027, start here:
Before April 2027
☐ Check your qualifying income for 2025/26
☐ Confirm whether MTD applies to you
☐ Check whether you qualify for an exemption
☐ Choose MTD-compatible software
☐ Move your bookkeeping into a digital system
☐ Organise your income and expense records
☐ Separate personal and business transactions where appropriate
☐ Speak to your accountant about how they'll support you
☐ Understand your quarterly reporting responsibilities
☐ Get comfortable with your software before the mandatory start date
The earlier you do these things, the less disruptive the transition is likely to be.
What Should Sole Traders Do Now?
If you may need to use MTD from 6 April 2027:
- Check your 2025/26 qualifying income to confirm whether you meet the £30,000 threshold.
- Check whether an exemption applies to you.
- Get your bookkeeping up to date.
- Choose MTD-compatible software, or suitable bridging software if you use spreadsheets.
- Speak to your accountant if you need help preparing or managing your MTD obligations.
You can also voluntarily sign up for MTD before your mandatory start date if you want to get used to the system early.
Need Help Preparing for Making Tax Digital?
At 4 Future Accountancy, we help sole traders, freelancers and contractors prepare for Making Tax Digital, including bookkeeping, tax and Self Assessment support.
If you're unsure whether the £30,000 MTD threshold applies to you, get in touch for practical support and a personalised quote.