Making Tax Digital: the £30,000 rule starts April 2027

The dates and who is affected

Making Tax Digital for Income Tax is being introduced in stages. The first group is already inside the system. The next group is the one that will feel the change from April 2027, and HMRC published its announcement on 5 October 2026, stating there are six months to go before that stage begins.

The 30,000 pound stage is the one that will capture a large number of people who have not had to think about digital record keeping before. HMRC estimates that around 1,077,000 more sole traders and landlords will need to create digital records and use compatible software from 6 April 2027. That estimate is based on HMRC analysis of 2024 to 2025 Self Assessment returns.

There are roughly six months until the 30,000 pound stage begins. That is the window in which the practical work of getting ready has to happen. The group already in the system since April 2026 has its second quarterly update due on 7 November, which is the first real test of how the quarterly cycle works in practice for a large population of taxpayers.

How to work out whether you are in scope

This is the part people get wrong. Turnover for this test does not mean profit. It means gross income before any tax allowances or expenses are deducted. It also combines income from self-employment and income from property. Both sources are added together to produce the figure that is compared with the threshold. HMRC has asked customers to check whether they meet the threshold rather than assume they do or do not.

A worked example makes the point. Someone with 18,000 pounds of self-employment turnover and 14,000 pounds of rental income has 32,000 pounds for this test. That is above the 30,000 pound threshold, so that person is in scope from April 2027. Neither source on its own comes close to the threshold. Self-employment turnover of 18,000 pounds is well below it. Rental income of 14,000 pounds is well below it. Added together, the figure is above it. This is why checking the combined gross figure matters more than looking at either income stream separately.

Because the figure is gross, a business with high costs and modest profit can still be well above the line. A sole trader with 40,000 pounds of turnover and 35,000 pounds of expenses has a profit of 5,000 pounds, but the turnover figure used for this test is 40,000 pounds. That person is in scope. The same logic applies to a landlord with significant mortgage interest or maintenance costs. The threshold test is not a test of profitability. It is a test of gross income from the two sources combined.

The practical step is to add together gross self-employment income and gross property income for the relevant period, before deducting expenses or allowances, and compare the total with 30,000 pounds for the April 2027 stage. If the total is above the threshold, the person is in scope. If it is below, the person is not in scope at that stage, though the threshold falls to 20,000 pounds in April 2028, so the position can change.

What you will actually have to do

The mechanics are straightforward to describe. Keep digital records of income and expenses. Use HMRC-recognised software. Send quarterly updates through that software. Complete the tax return at the end of the year. Those are the four elements. The quarterly updates are sent to HMRC through the software, and the year-end tax return still exists alongside them.

HMRC states the quarterly updates are not additional tax returns, but short summaries. That distinction matters. The quarterly update is a summary of income and expenses for the quarter, sent through compatible software. It is not a full tax return, and it is not a fourth, fifth or sixth tax return on top of the annual one. The annual tax return remains part of the process. The quarterly updates sit alongside it as a regular summary of the underlying records.

Quarterly updates need to be sent through HMRC-recognised software. A list of compatible software is published on GOV.UK. The choice of product is the taxpayer's. HMRC does not direct people to a particular product, and the list on GOV.UK sets out the options that are recognised for the purpose. The software handles the sending of the quarterly updates and the digital record keeping that sits behind them.

The burden should not be overstated, and it should not be dismissed. For someone already keeping digital records, the change is mainly about the rhythm of sending summaries four times a year rather than once. For someone used to a shoebox of receipts and a single annual exercise, the change is more substantial. Either way, the requirements are digital records, recognised software, quarterly updates and the annual tax return.

Signing up early and who cannot

HMRC is encouraging people to sign up before it becomes mandatory. Signing up early means customers can make sure their details are correct from the start and have time to choose the software that works best for them. Craig Ogilvie, HMRC's Director of Making Tax Digital, said hundreds of thousands of sole traders and landlords are already successfully using Making Tax Digital and now it is time for the next group to get ready. He said signing up now means people can prepare and familiarise themselves with the process before it becomes mandatory next April.

To sign up, customers must be registered for Self Assessment and have submitted a tax return in the last two years. Those are the conditions. Agents can sign up their clients through GOV.UK. That route exists for people who use an agent and want the agent to handle the sign-up process on their behalf.

There are certain exemptions from Making Tax Digital for Income Tax, including for those who are digitally excluded. Details are on GOV.UK. An exemption must be applied for rather than assumed. Being unsure about software, or finding the process inconvenient, is not the same as holding an exemption. The exemption route exists for specific circumstances, and the guidance on GOV.UK sets out what those circumstances are and how to apply.

The practical sequence for someone who expects to be in scope from April 2027 is to check the combined gross figure, confirm Self Assessment registration and recent return submission, decide on software from the GOV.UK list, and sign up. Doing that before the mandatory date allows time to correct details and to get used to the quarterly rhythm without the pressure of a deadline.

Why the timing matters

Six months is enough time to choose software deliberately, check that the right income sources are recorded and get used to the rhythm of quarterly reporting before it counts. That is the practical case for acting early. It is not a case for alarm. The requirements are known, the software list is published, and the sign-up route is open. What the six months buys is the ability to make decisions at a sensible pace rather than in a rush.

The group already in the system since April 2026 has its second quarterly update due on 7 November. That is the first real test of how the cycle works in practice. The experience of that group will show how the quarterly rhythm lands for sole traders and landlords with different kinds of records and different software. For the group joining in April 2027, that is useful context rather than a reason to wait until the last moment.

Checking the threshold is the first step, and it is the step most likely to be done incorrectly if it is done from memory. The figure is gross income from self-employment and property combined, before expenses or allowances. Someone with 18,000 pounds of self-employment turnover and 14,000 pounds of rental income is above the threshold at 32,000 pounds. That is the test. HMRC has asked customers to check whether they meet the threshold rather than assume.

For guidance, the place to look is GOV.UK, including the sign-up guidance and HMRC's own material on Making Tax Digital for Income Tax. Those sources set out the threshold test, the sign-up conditions, the software list and the exemption route. They are the reference points for anyone working out whether they are in scope and what the next step is.

Source: GOV.UK: sign up for Making Tax Digital for Income Tax.

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Frequently asked questions

What counts as turnover for the 30,000 pound threshold?

Turnover for this test is gross income from self-employment and property combined, before any tax allowances or expenses are deducted. Both sources are added together to produce the figure compared with the threshold.

When does Making Tax Digital for Income Tax start for the 30,000 pound group?

It extends to sole traders and landlords with turnover above 30,000 pounds from 6 April 2027. HMRC estimates around 1,077,000 more people will be brought into the system at that stage.

Are quarterly updates the same as tax returns?

No. HMRC states the quarterly updates are not additional tax returns, but short summaries. The year-end tax return still has to be completed.

What is needed to sign up?

To sign up, customers must be registered for Self Assessment and have submitted a tax return in the last two years. Agents can sign up their clients through GOV.UK.

Does the threshold change again after April 2027?

Yes. The threshold will decrease further to 20,000 pounds from April 2028.