From 6 April 2027, Making Tax Digital (MTD) for Income Tax Self Assessment will become mandatory for individuals with qualifying turnover above £30,000. Over one million business owners and property owners across the UK will be brought into this phase.
While 2027 might feel a long way off, the decisions you make now regarding your record-keeping will determine how seamless or stressful this transition becomes.
What Is Changing Under MTD for Income Tax?
Under the current system, most sole traders and landlords submit an annual Self Assessment tax return covering the entire tax year. Under MTD, the traditional annual return is replaced by an ongoing digital process:
• Digital record-keeping: You must keep your income and expenditure records digitally using HMRC-compatible software. • Quarterly updates: Instead of filing once a year, you will send summary updates of your income and expenses to HMRC every three months. • Final declaration: At the end of the tax year, you will confirm your final figures, make any tax adjustments, and complete your tax position.
How Is the £30,000 Threshold Calculated?
This is where many people catch themselves out:
It is based on gross income (turnover), not net profit. If you have self-employment income of £35,000 with £10,000 in costs, your turnover is £35,000—meaning you are in scope.
It combines self-employment and property income. If you earn £20,000 as a sole trader and receive £12,000 in rental income, your combined qualifying income is £32,000, bringing you above the threshold.
It is based on earlier tax returns. HMRC looks at qualifying income from the 2025/26 tax year to determine whether you must join MTD in April 2027.
Why You Should Start Preparing Now
HMRC is actively encouraging sole traders and landlords to adopt digital record-keeping early. Moving to digital bookkeeping well before the deadline brings distinct advantages:
• Fewer surprises: Keeping records updated in real time gives you a clear, continuous view of your cash flow and estimated tax liability throughout the year. • Familiarity with software: Getting used to compatible software ahead of time removes the steep learning curve when digital reporting becomes mandatory. • Avoid penalty points: HMRC uses a points-based penalty system for late submissions. Establishing strong habits early helps protect you from avoidable compliance fines.
Practical Steps to Take Today
Calculate your combined turnover: Review your 2025/26 self-employment and rental figures to establish if you are approaching or above the £30,000 mark.
Review your current processes: If you still rely on spreadsheets, paper receipts, or physical logbooks, begin looking at cloud-based accounting solutions that comply with HMRC standards.
Transition incrementally: Try moving your day-to-day income and expense tracking into a digital system before the official deadline so it becomes second nature.
How Westwood Accountancy Can Help
At Westwood Accountancy, we guide self-employed individuals and property owners through tax policy changes with practical, tailored advice. Whether you need help determining if you meet the threshold, selecting the right software, or managing your quarterly submissions on your behalf, our team is here to handle the complexity.
If you are unsure how Making Tax Digital will affect your business or rental property, contact us to discuss your next steps.
