HMRC estimates that around 1,077,000 more sole traders and landlords will need to join, based on its analysis of 2024 to 2025 Self Assessment returns. This article explains who is affected, what changes and what to do before April 2027. For a broader introduction to how MTD works
Sole Traders and Landlords Earning Over £30,000 Urged to Get Ready for Making Tax Digital
October 16, 2026
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Payments on Account: How They Work and How to Reduce Them
HMRC estimates that around 1,077,000 more sole traders and landlords will need to join, based on its analysis of 2024 to 2025 Self Assessment returns. This article explains who is affected, what changes and what to do before April 2027. For a broader introduction to how MTD works, see our guide to Making Tax Digital for sole traders and landlords.
What has HMRC announced?
In its press release of 5 October 2026, HMRC urged sole traders and landlords with income over £30,000 to sign up for MTD for Income Tax now, rather than wait until it becomes compulsory. Signing up early gives you time to check your details, choose software and get used to sending updates. Accountants and other agents can sign up their clients on GOV.UK.
MTD for Income Tax is already compulsory for people with qualifying income over £50,000, who have used it since 6 April 2026. The threshold then falls in two further stages, according to HMRC’s guidance:
| Self Assessment return HMRC checks | Qualifying income | Must use MTD for Income Tax from |
| 2024 to 2025 tax year | More than £50,000 | 6 April 2026 |
| 2025 to 2026 tax year | More than £30,000 | 6 April 2027 |
| 2026 to 2027 tax year | More than £20,000 | 6 April 2028 |
Does the £30,000 threshold apply to you?
According to HMRC’s eligibility guidance, you need to use MTD for Income Tax if all three of these apply:
- you are a sole trader or landlord registered for Self Assessment
- you receive income from self-employment, property, or both
- your qualifying income is above the threshold for the relevant tax year
Qualifying income means turnover, not profit
“Earning over £30,000” does not mean profit over £30,000. HMRC defines qualifying income as your total income from self-employment and property before any expenses are deducted. The press release calls this turnover and confirms it is measured before tax allowances or expenses. A sole trader with £40,000 of sales and £25,000 of costs makes a profit of £15,000, but has qualifying income of £40,000.
Self-employment and property income are added together
If you have both, the two gross figures are combined. HMRC’s own example adds £25,000 of rental income to £27,000 of self-employment income, giving qualifying income of £52,000.
Income that does not count
Other income is left out of the calculation, including:
- employment income taxed through PAYE
- your share of profit from a partnership as an individual partner
- dividends, including dividends from your own company
- the State Pension and private pensions
You still report this income on your tax return, but it does not push you over the threshold.
Three worked examples
These examples use hypothetical figures and assume no exemption applies.
| Example (2025 to 2026 figures) | Gross self-employment income | Gross property income (your share) | Qualifying income | Using MTD from 6 April 2027? |
| A: self-employed electrician with £14,000 of costs and a profit of £20,000 | £34,000 | £0 | £34,000 | Yes |
| B: employee on a £45,000 salary who lets one flat | £0 | £18,000 | £18,000 | No. The salary does not count |
| C: part-time freelancer who co-owns a rental house 50/50 with a sibling; the house earns £30,000 rent a year | £16,000 | £15,000 | £31,000 | Yes |
In example C, only the freelancer’s half of the rent counts, which HMRC confirms for jointly owned property, but it still takes them over £30,000. In example B, if the flat’s gross rent for 2026 to 2027 is more than £20,000, the landlord would need to use MTD from 6 April 2028.
When do the new obligations start?
Two tax years matter. Your 2025 to 2026 tax return decides whether you are in scope. The new obligations start in the following tax year, 2027 to 2028, which begins on 6 April 2027. You still file your 2025 to 2026 and 2026 to 2027 returns in the usual way.
HMRC reviews returns each year and writes to people above the threshold. Its guidance is clear that if you do not receive a letter, it is still your responsibility to check and sign up.
Your 2027 to 2028 deadlines
Most people use standard update periods, which follow the tax year. Each quarterly update covers the tax year so far, not just the latest three months. These dates come from HMRC’s quarterly update guidance:
| What you send | Period covered (standard update periods) | Deadline |
| First quarterly update | 6 April to 5 July 2027 | 7 August 2027 |
| Second quarterly update | 6 April to 5 October 2027 | 7 November 2027 |
| Third quarterly update | 6 April 2027 to 5 January 2028 | 7 February 2028 |
| Fourth quarterly update | 6 April 2027 to 5 April 2028 | 7 May 2028 |
| 2027 to 2028 tax return and any tax due | Whole tax year | 31 January 2029 |
If your accounting period runs from 1 April to 31 March, you can choose calendar update periods instead. The deadlines stay the same.
Reporting is not paying
Quarterly updates are short summaries of income and expenses. They are not extra tax returns and they do not create quarterly tax bills. You still submit one tax return a year and pay your tax bill as you do now, by 31 January after the end of the tax year. After each update you can see an estimate of your tax bill, which helps with planning.
No penalty-free year for quarterly updates
HMRC is not applying penalty points for late quarterly updates in the 2026 to 2027 tax year. That concession is tied to the tax year, so it does not cover people who join in April 2027. From 2027 to 2028, each missed deadline earns a penalty point. Reaching four points triggers a £200 penalty, with a further £200 for each later missed deadline. HMRC’s August 2026 update confirms points-based penalties apply from 6 April 2027.
Late payment works differently. In your first year under the new penalty rules, you have 30 days from the due date to pay in full or agree a payment plan before late payment penalties apply. Late payment interest still runs from the first day. Our article on Self Assessment deadlines and penalties explains the wider system.
What sole traders should check now
- Your 2025 to 2026 turnover. Use gross sales, not profit. If you use the cash basis and are VAT registered, HMRC says VAT counts towards qualifying income if you include it in your declared income.
- Part-year trading. If you started trading during the year, HMRC will scale your income up to a full year. Six months of trading is doubled.
- Your records today. If business and personal spending share one bank account, a separate business account usually makes digital records easier to keep. This is practical advice, not a legal requirement.
- Your current software. Check whether it appears in HMRC’s software finder (see below).
If you would rather hand the bookkeeping over, our sole trader accounting service covers records and your Self Assessment return.
What landlords should check now
- Add up rent across all your properties. The threshold applies to your total property income, not to each property separately, and is combined with any self-employment income.
- Use rent before costs. Letting agent fees, repairs and mortgage interest are expenses, so they do not reduce qualifying income.
- Joint ownership. Count your share only. If you only receive your share after expenses, HMRC assesses that figure.
- Joint lets in quarterly updates. You can report income only during the year and add expenses later by resending your fourth update before you file your return.
- New lettings. If property income started part-way through the year, you need to scale it up to a full year yourself.
- Overseas property. If you are UK resident, foreign property income counts too.
For help with rental records and your return, see our landlord accounting service.
Software and digital records
HMRC does not provide MTD software. You need a product, or combination of products, that can keep digital records, send quarterly updates and submit your tax return. HMRC’s software finder lists recognised products and filters them by your income sources and accounting period.
You can keep using spreadsheets if you add bridging software that connects them to HMRC. Each digital record needs the amount, the date and a category, using the same categories as Self Assessment. Digital records are only required for self-employment and property income. Salary, savings and dividends are added before you submit your tax return.
Software helps, but it does not make you compliant on its own. Records still need to be complete, correctly categorised and up to date before each deadline.
Exemptions: who may not need to sign up
Some people will not need to use MTD for Income Tax even with income above £30,000. HMRC’s exemptions guidance includes:
- partnerships, which are not yet in scope
- people without a National Insurance number before the start of the tax year
- trustees, and personal representatives acting for someone who has died, in that role
- people who are digitally excluded, for example because age, health or disability prevents them from using a computer, or because they cannot get internet access. This exemption must be applied for
Some exemptions only last until April 2027, such as those for people who claimed qualifying care relief or included the SA109 residence pages on their 2024 to 2025 return. If one of these applies to you, check whether it continues.
HMRC will not accept an exemption application based only on being unfamiliar with software, the cost or time involved, or having filed on paper before. If you are exempt, you still file a Self Assessment return as normal. If all of your self-employment and property income has stopped, tell HMRC before the start of the next tax year.
Your preparation checklist
Required if you are in scope:
- Work out your qualifying income from your 2025 to 2026 return, combining all self-employment and property turnover.
- Check whether an exemption applies.
- Choose software HMRC recognises, or bridging software if you keep spreadsheets.
- Sign up for MTD for Income Tax, yourself or through an agent, before your first update is due. You must be registered for Self Assessment and have filed a return in the last two years.
- Keep digital records from 6 April 2027, or from 1 April 2027 if you use calendar update periods.
- Send each quarterly update on time and submit your 2027 to 2028 return by 31 January 2029.
Sensible preparation:
- File your 2025 to 2026 return well before 31 January 2027 so you know your qualifying income early. Our Self Assessment tax return service can help.
- Consider volunteering now to practise. Volunteers do not get penalties for late quarterly updates, although penalty points still apply to late tax returns. If you join part-way through a year, you will need to send any missed updates for that year.
- Separate business and personal transactions.
- Agree with your accountant who will keep records and who will send updates.
- Download our free Making Tax Digital readiness guide for a printable overview.
Common mistakes to avoid
- Checking profit instead of turnover.
- Looking at only one income source when you have both trading and rental income.
- Counting all the rent from a jointly owned property instead of your share.
- Testing each property against £30,000 separately.
- Assuming quarterly updates mean paying tax every quarter.
- Waiting for a letter from HMRC before acting.
- Assuming the 2026 to 2027 penalty concession applies to you.
- Assuming spreadsheets are banned. They can be used with bridging software.
How Aksons Accounting can help
Aksons Accounting provides fixed-fee accounting for sole traders and landlords. Our Making Tax Digital compliance support covers setting up MTD for Income Tax, ongoing support with your records and handling quarterly submissions. If you are not sure whether your 2025 to 2026 figures take you over £30,000, contact our team to review your position before April 2027.
This article is general information based on HMRC guidance as at 14 October 2026. It is not personal tax advice.
Frequently Asked Questions
1. What is the £30,000 Making Tax Digital threshold?
It is the level of qualifying income above which sole traders and landlords must use MTD for Income Tax from 6 April 2027. HMRC tests it against your 2025 to 2026 Self Assessment return.
2. Is the threshold based on turnover or profit?
Turnover. Qualifying income is your gross self-employment and property income before expenses and tax allowances.
3. Do rental income and self-employment income count together?
Yes. If you have both, the gross amounts are added together.
4. Does the threshold apply to each property separately?
No. Rent from all your properties counts towards one total, together with any self-employment income. For jointly owned property, only your share counts.
6. Does my salary count towards the £30,000?
No. PAYE employment income, dividends, pensions and partnership profit shares do not count towards qualifying income.
7. Does quarterly reporting mean I pay tax every quarter?
No. Quarterly updates are summaries. You still pay your tax bill as you do now, by 31 January after the end of the tax year.
8. Can I keep using spreadsheets?
Yes, if you link them to HMRC with bridging software that works with MTD for Income Tax.
9. Will HMRC sign me up automatically?
From September 2026 HMRC began signing up people in the £50,000 group who had not signed up themselves. As of 14 October 2026, HMRC had not published the same arrangement for the £30,000 group. HMRC recommends signing up yourself so your details are correct from the start.
10. When is my first quarterly update due?
If you start on 6 April 2027 and use standard update periods, your first update covers 6 April to 5 July 2027 and is due by 7 August 2027.
11. What if my income falls below £30,000 later?
Entry depends on your 2025 to 2026 return. Once you are using MTD, you can choose to opt out if your qualifying income stays below the relevant threshold for three tax years in a row.
12. Can my accountant send quarterly updates for me?
Yes. An agent can sign you up and act for you once you have authorised them.
13. Are partnerships affected?
Not yet. Partnerships do not currently need to use MTD for Income Tax, and your share of partnership profit does not count towards qualifying income.
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