HMRC warns £30,000 earners over digital tax shift

HM Revenue & Customs is urging sole traders and landlords with qualifying income above £30,000 to prepare for Making Tax Digital as the next mandatory phase approaches in April.

From 6 April 2027, people within the threshold will have to keep qualifying business records digitally and use compatible software to send quarterly summaries of income and expenses to HMRC.

The requirement already applies to sole traders and landlords with qualifying income above £50,000, who entered Making Tax Digital for Income Tax from April 2026. The threshold is scheduled to fall again to more than £20,000 from April 2028.

HMRC issued its latest warning with six months remaining before the £30,000 threshold takes effect, encouraging people who expect to fall within scope to establish their position and choose suitable software before reporting becomes mandatory.

Qualifying income is the combined gross income from self-employment and property before expenses and tax allowances are deducted. Someone who receives income from both sources therefore has to consider the combined figure rather than assessing each activity separately.

HMRC estimates that around 1.077 million additional sole traders and landlords will need to join Making Tax Digital from April 2027, based on analysis of Self Assessment returns. That population sits between the first wave above £50,000 and the subsequent group that will enter once the threshold falls to £20,000.

The change affects more than the channel used to file an annual tax return. Businesses within scope need compatible software to create and retain digital records and send quarterly updates summarising business or property income and expenses.

The annual tax process remains, but the underlying bookkeeping becomes a more continuous digital requirement. That represents a substantial operating change for businesses that have previously gathered records retrospectively or relied on accountants to organise much of the information near the Self Assessment deadline.

HMRC is encouraging early sign-up so users have time to select software and become familiar with the reporting process. Recognised products range from relatively simple record-keeping tools to platforms integrated with wider accounting systems.

Implementation comes against persistent concern about the administrative cost of tax compliance. HMRC’s own policy assessment for the population above £30,000 estimates an increase in continuing annual administrative burden, even after allowing for expected savings from digitalisation.

Accountants and tax agents will also need to adapt as the regime expands. More frequent updates spread client work through the year, while customers with less experience of digital accounting may require additional support when setting up records and software.

The current rollout provides some evidence of how that transition is progressing. By August, more than 436,000 sole traders and landlords in the first mandatory cohort had successfully submitted their first quarterly update, while more than 570,000 had signed up to the service.

Those figures still leave a substantial expansion ahead. The lower thresholds progressively bring Making Tax Digital into parts of the small-business population where dedicated finance staff and established accounting systems are less common.

For businesses approaching the £30,000 threshold, preparation now centres on three questions: whether qualifying income places them within scope, which compatible software they will use and whether bookkeeping will be managed internally or through an agent. Those decisions need to be in place before the new requirement begins on 6 April 2027.