Making Tax Digital from April 2027: What Sole Traders and Landlords Need to Know

Making Tax Digital for Income Tax began on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. On 6 April 2027 the threshold falls to £30,000, and that stage is decided by the 2025 to 2026 tax return, which is the one due by 31 January 2027. The figures you report this coming January set whether you are in.

The £30,000 test

Qualifying income is your gross self employment turnover plus your gross property income, added together, before any expenses are deducted. HMRC checks it against the Self Assessment return you submitted for the earlier year. For the April 2027 start, that is the 2025 to 2026 return.

Because it is a gross figure, a business with modest profit can be caught. A sole trader turning over £34,000 and making £15,000 of profit is over the £30,000 line. So is a landlord with £18,000 of rent who also does £13,000 of freelance work, because the two are combined.

What counts, and what does not

Counted: gross turnover from self employment, gross rents from UK property, your share of jointly held property income, and foreign property and self employment income if you were UK resident. Also counted are income from a source that has since ceased if you still have another continuing source, and property or trading income you are entitled to as a beneficiary of a bare trust.

Not counted: employment income taxed under PAYE, pensions including the State Pension, dividends including dividends from your own company, and your share of a partnership profit. Those still go on your tax return, they simply do not go into the qualifying income test. Partnerships will be brought into Making Tax Digital at a later date which has not yet been set.

What you actually have to do

Three things change. Records have to be kept digitally in software that can communicate with HMRC. A summary of income and expenses has to be sent to HMRC every quarter. After the tax year ends a final declaration pulls everything together, adds any other income and reliefs and settles the tax.

The quarterly deadlines are fixed. They fall on 7 August for the quarter to 5 July, 7 November for the quarter to 5 October, 7 February for the quarter to 5 January and 7 May for the quarter to 5 April. Each update is cumulative, so a later one corrects an earlier one and nothing has to be perfect first time.

What does not change is the tax. You are not paying quarterly. The amounts and the payment dates of 31 January and 31 July are the same as they are now, and the final declaration replaces the Self Assessment return rather than adding to it.

Digital records in practice

A spreadsheet typed up at the year end from a folder of bank statements will not satisfy this. Income and expenses have to be recorded digitally as they arise, in compatible software, with a digital link through to what is sent to HMRC. In practice that means a bank feed, receipts captured on a phone, and sales invoices raised in the software rather than in a word processor.

For most people this is the real work. Once the records exist through the year, the quarterly update takes very little doing, because it is generated from data that is already there. Where businesses struggle is when the records are still being assembled retrospectively and a deadline arrives every three months instead of once a year.

Penalties

Late submission works on points. One point is given for each missed quarterly update or missed return deadline, with only one point per deadline however many businesses you have. At four points a £200 penalty is charged, and each further miss adds another £200. There are no penalties for missed quarterly updates in the 2026 to 2027 tax year, which is a deliberate easement for the first group.

Late payment penalties are separate, and they are harsher than the old regime in the early weeks. Nothing is charged in the first fifteen days. For the 2027 to 2028 tax year, 4% of the tax outstanding at day fifteen is charged if you are between sixteen and thirty days late, with a further 4% of the amount outstanding at day thirty if you go beyond that, and then an additional 10% a year accruing daily from day thirty one. Late payment interest runs from the first day, at 7.75% from 9 January 2026. Payments on account are not subject to these penalties.

A checklist for April 2027

• Work out your qualifying income from the 2025 to 2026 return before you file it, so you know where you stand rather than finding out later.
• Choose compatible software now and use the 2026 to 2027 year as a practice run. Starting digital records a year early costs nothing and removes the deadline pressure.
• Connect the bank account the business income arrives in, and stop using a personal account for business if you still are.
• Get receipt capture working. It is the habit that takes longest to form and the one that makes everything else easy.
• If you hold property jointly, agree with the other owner how records will be kept, because you each report your own share.
• Check whether an exemption applies to you. Exemptions exist, including for people who are digitally excluded, and anyone exempt still reports income on a Self Assessment return as now.
• Diarise 7 August 2027, the first quarterly deadline for anyone joining in April 2027.

If your income comes from property rather than a trade, the detail differs enough to be worth reading separately. Our complete guide to Making Tax Digital for landlords covers joint ownership, multiple properties and short lets.