Making Tax Digital for Income Tax: the April 2027 guide

Making Tax Digital for Income Tax reaches sole traders and landlords with more than £30,000 of income on 6 April 2027. From that date, anyone over the line has to keep their business records in software that works with HMRC’s system and send HMRC a short summary every three months, as well as the yearly tax return. HMRC says around 1,077,000 more sole traders and landlords will have to start at this stage. The £30,000 is turnover, not profit, and it is checked on the 2025 to 2026 tax return due by 31 January 2027, so plenty of people who will be in scope have not realised it yet.

This guide sets out who is affected, what changes, what a missed deadline costs and what to do between now and April. Every date and figure comes from GOV.UK, HMRC or legislation.gov.uk, and the sources are listed at the end. We are a web and software agency, not accountants: this is a plain-English summary of HMRC’s published guidance, not tax advice. For your own position, speak to an accountant or to HMRC.

Making Tax Digital for Income Tax: the dates

Making Tax Digital for Income Tax started on 6 April 2026 for people with qualifying income over £50,000. It is being widened in two more steps. Each time, HMRC looks at your income in the tax year two years before the start date:

The thresholds are now in law, in the Income Tax (Digital Obligations) Regulations 2026 (SI 2026/336), and the test is “more than”: qualifying income of exactly £30,000 does not bring you in. If your figures cover a period other than 12 months, they are adjusted in proportion before they are compared.

Who counts: what “qualifying income” means

HMRC’s definition is short: “Qualifying income is your total income from self‑employment and property. This is the amount before expenses (also known as turnover), based on the tax return you submitted in the previous tax year.”

So these are added together:

• Self-employment turnover: everything you invoiced or took as a sole trader, before costs.
• Property income: rent before expenses. If you own a property jointly, only your share counts.

And these do not count towards the threshold:

• employment income taxed through PAYE
• your share of profit from a partnership as an individual partner
• dividends, including those from your own company
• the State Pension and private pensions

HMRC gives its own examples. Someone with £25,000 of rent and £27,000 of self-employment income has qualifying income of £52,000. Someone who owns a £50,000-a-year rental property half and half with a sibling has qualifying income of £25,000.

Two more of our own, worked out on HMRC’s rules. An electrician who invoiced £34,000 in 2025 to 2026 but kept £18,000 after the van, tools and materials is in scope from April 2027, because the test is turnover, not profit. Someone on a £45,000 salary with an £8,000 sideline has qualifying income of £8,000 and is not in scope at this stage.

If you have only been trading for part of the year, HMRC scales the figure up: its guidance says that “if you’ve only been trading for 6 months … we’ll double your income”. Landlords with a part year scale their own figures up in the same way.

Limited companies are a different case. Making Tax Digital for Income Tax is for sole traders and landlords registered for Self Assessment. A company’s own profits pay Corporation Tax, and HMRC’s transformation roadmap states that “HMRC do not intend to introduce MTD for CT”. VAT is separate again: HMRC says that since April 2022 “all VAT-registered businesses have been required to keep digital records and send VAT returns using software that works with Making Tax Digital”.

What changes from 6 April 2027

1. Your records go into software

For every item of income and every expense, the software has to hold the amount, the date and the category. The categories are the same ones used on a Self Assessment return, but HMRC’s guidance adds a simpler option: a sole trader with turnover under £90,000 only needs to record whether each transaction is income or an expense. You still keep the original invoices and receipts.

Spreadsheets are allowed if they are connected to HMRC through “bridging software”, but the records have to be digitally linked from start to finish. HMRC’s guidance says you must not “copy information by writing it out in another cell or in other software” or “use ‘cut and paste’ or ‘copy and paste’ to move records”. Linked cells, imports and direct connections are fine.

2. A summary every three months

HMRC calls these quarterly updates and is clear that “they are summaries, not tax returns”. Your software adds up your income and expenses by category and sends the totals; HMRC does not receive the individual records. Each update runs from the start of the tax year to the end of the latest quarter, and you still have to send one if nothing came in or went out. For someone starting on 6 April 2027 the first year looks like this:

If your accounting period runs from 1 April to 31 March, you can choose “calendar update periods” ending on the last day of June, September, December and March instead. The deadlines stay the same, and you have to choose before you send your first update.

3. The tax return comes from the same software

After the year ends you finalise the figures and send your tax return through the software by 31 January, so 31 January 2029 for the 2027 to 2028 year. For the year before you start, you file a normal Self Assessment return as you do now: for the April 2027 group, that is the 2026 to 2027 return due by 31 January 2028.

Penalties: no penalty-free first year for quarterly updates

The people who started in April 2026 were given a break: “There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year.” HMRC’s guidance does not offer the same easement for the 2027 to 2028 tax year, so anyone joining in April 2027 should plan on penalty points applying to their quarterly updates from their first year.

• Late submission: each missed deadline, whether a quarterly update or the tax return, adds one penalty point, and you can only get one point per deadline. At 4 points you pay a £200 penalty, and another £200 for each further deadline missed. Points for Income Tax are kept separately from any VAT points.
• Late payment, 2027 to 2028 tax year: nothing if you pay within 15 days; 4 % of the tax owed at day 15 if you pay between 16 and 30 days late; and if you pay 31 days or more late, 4 % at day 15 plus 4 % at day 30, plus a yearly rate of 10 % on what is still owed, charged daily from day 31.
• Your first year of the new penalties: HMRC gives you 30 days from the due date to pay in full or set up a payment plan before late payment penalties start. After the first year that drops to 15 days. The 30 days are given only once: if you volunteered early and are now required to use the service, you keep 15 days. Payments on account are not covered by late payment penalties.

The new penalty system is not limited to Making Tax Digital: HMRC says that “from April 2027, the new penalties will apply to everyone who submits a personal Self Assessment tax return”. Late payment interest is charged on top from the first day a payment is late.

How you get signed up

HMRC says it will write to you if your income is over the threshold, but adds: “If you did not receive a letter, it is still your responsibility to check if and when you need to use Making Tax Digital for Income Tax, and make sure you are signed up”. To sign up you must be registered for Self Assessment and have sent a tax return in the last two years. You can volunteer early: HMRC says that if you need to start on 6 April 2027, “you can sign up and volunteer now.”

HMRC has started doing it for some people. Its guidance says that from September 2026 it “will start to sign up anyone who needs to use Making Tax Digital for Income Tax for the 2026 to 2027 tax year and has not signed themselves up.” That covers the £50,000 group; HMRC has not announced the same for people starting in April 2027, so plan on signing up yourself. An accountant can sign you up instead and send your updates. They can only submit your tax return through the service if they are your main agent, and they need your written confirmation first.

If your self-employment or property income stops altogether, tell HMRC before the next tax year starts, or you will still be expected to use the service.

Exemptions

• Digitally excluded: if it is not reasonable for you to use software, you can apply for an exemption. HMRC’s examples include your age, a health condition or a disability stopping you from using a computer, tablet or smartphone, or being unable to get internet access at home or work because of where you are, with no suitable alternative. So can practising membership of a religious society whose beliefs are incompatible with using digital records or communications. HMRC will not accept an application whose only reason is that you filed on paper before, are unfamiliar with accounting software, have only a few records, or would face extra time or cost.
• No National Insurance number: you are exempt automatically if you did not have one before the start of the tax year.
• Partnerships: they “do not currently need to use Making Tax Digital for Income Tax”, and no date has been set.
• Automatic exemptions that continue after April 2027 include trustees and personal representatives, ministers of religion, Lloyd’s members, people claiming Married Couple’s Allowance or Blind Person’s Allowance, and people who are not physically or mentally capable and have a power of attorney or deputy in place. HMRC says some of these groups will need to use the service in the future. A few other exemptions covered only the 2026 to 2027 tax year.

Exemptions are applied for by contacting HMRC. If you would otherwise start on 6 April 2027, HMRC says you can apply now.

Choosing the software

HMRC keeps a list called “Find software that works with Making Tax Digital for Income Tax”. Every product on it “has been through HMRC’s recognition process”, and HMRC does not recommend any of them. It also notes that “free products are available for those with simple tax affairs but there may be limits on how the product can be used”, and the government has said it is “committed to ensuring the availability of free software products for small businesses with simple tax affairs”.

Before you choose, check:

• that it covers your income types: self-employment, property or both
• that it can be used by businesses directly, not only by agents, if you will run it yourself
• how your money gets in: a bank feed or a file import saves typing, but card payouts usually arrive after fees and need recording in full
• whether your accountant already uses it, so you can share one set of books
• what it costs once a free trial or free tier ends

Where your website comes in

For many small businesses, a growing share of income now comes through the website: online bookings, deposits and card payments through Stripe, PayPal or GoCardless (we compare those in our guide to UK payment providers). You can still type those sales into your records software by hand: HMRC says software “that takes bookings” or “a till system that records sales receipts” does not need to be digitally linked. What you must not do is move records that are already in one record-keeping program into another by copying or retyping. Typing in every booking each quarter is slow and easy to get wrong, though, so it pays to let the figures arrive by themselves:

• a monthly export from the payment provider or the website in a format your software imports
• a direct connection between the website or booking system and the software, where the software offers one
• your bank feed, with one catch: card providers such as Stripe and PayPal usually pay out in batches after taking their fees, and HMRC says to “create a digital record for the full amount of income” and a separate one for the expenses, so the payout alone is not the whole record

The first two are usually small development jobs. If you take bookings with deposits, our article on booking systems with Stripe deposits shows how those payments are recorded in the first place.

The button opens our book hours page with WordPress Development and 5 hours already selected. We handle the technical connection only: choosing software for your tax position and preparing your figures are jobs for you and your accountant. If something does not fit a fixed number of hours, tell us what you need.

What to do before 6 April 2027

1. Add up your self-employment and property turnover for 2025 to 2026, before expenses. If it is over £30,000, you start in April 2027.
2. Send your 2025 to 2026 Self Assessment return by 31 January 2027: it is the return HMRC uses to decide.
3. Choose software, ideally with your accountant, and try it for a month or two before April.
4. Decide how sales from your bank, card payments and website will reach the software: typed in, imported or through a direct link.
5. Sign up, and decide between standard and calendar update periods before your first update.
6. Put 7 August 2027 in the diary: it is the first quarterly deadline.
7. If you think you qualify for an exemption, apply to HMRC now.

If you are just starting out, our free launch planner sets out what a new business needs online in the first months, and why a new business needs a website covers what one costs and returns.

Sources

All checked on 14 October 2026.

• Find out if and when you need to use Making Tax Digital for Income Tax (GOV.UK): start dates, thresholds and HMRC letters.
• The Income Tax (Digital Obligations) Regulations 2026, SI 2026/336 (legislation.gov.uk): the thresholds in law.
• Work out your qualifying income (GOV.UK): what counts, examples and part-year rules.
• Sole traders and landlords earning more than £30,000 urged to act now (HMRC press release, 5 October 2026): the 1,077,000 estimate.
• Making Tax Digital for Income Tax business population statistics (HMRC): the 864,000 figure.
• Reduction of the threshold from £30,000 to £20,000 from April 2028 (HMRC policy paper): the 970,000 estimate.
• Create digital records, Send quarterly updates and Submit your tax return (GOV.UK): records, update periods, deadlines and the year-end return.
• Penalties for Making Tax Digital for Income Tax (GOV.UK): penalty points and late payment penalties.
• Sign up for Making Tax Digital for Income Tax (GOV.UK): signing up, volunteering and HMRC signing people up.
• Find out if you can get an exemption and Apply for an exemption (GOV.UK).
• Choose the right software and Find software that works with Making Tax Digital for Income Tax (GOV.UK).
• Income Tax (MTD) end-to-end service guide (HMRC Developer Hub): the commitment on free software.
• HMRC’s transformation roadmap (GOV.UK): no plan for MTD for Corporation Tax.
• Benefits of Making Tax Digital (GOV.UK): MTD for VAT since April 2022.

Photo: Job Vermeulen via Unsplash