Many more sole traders and landlords will be required to comply with making tax digital (MTD) for income tax when the qualifying income threshold is reduced from £30,000 to £20,000.
The Budget confirmed that taxpayers with qualifying income of £50,000 or more will be required to join MTD in April 2026 as planned. Those with qualifying income between £30,000 and £50,000 will be brought into MTD from April 2027.
The scope will be expanded to include incomes of £20,000 and above by the end of the current parliament, bringing many more sole traders and landlords within the scope of MTD.
To comply with the requirements, mandated taxpayers will need to use third party MTD-compliant software to keep digital records and file quarterly summaries of their income and expenses with HMRC.
Qualifying income is broadly defined as total gross income from trading and property, as reported on the most recent self assessment tax return. To decide which taxpayers will be mandated to join MTD for Income Tax in April 2026, HMRC will look at the 2024-25 tax return, i.e. the one for the current tax year.
Online eligibility checker
You will need to use MTD for income tax from April 2026 if you:
· are an individual registered for self assessment;
· get income from self-employment or property, or both, before 6.4.25; and
· have a qualifying income of more than £50,000 in the 2024-25 tax year.
You can use HMRC’s online eligibility checker at GOV.uk to decide when you will be required to join MTD for income tax.
Where an individual cannot use MTD, for example if they are digitally excluded, they may be able to claim an exemption. We can help you with this when the application process opens.
If you or someone you know is a sole trader or landlord with qualifying income of £20,000 or more, contact us without delay so we can help get the business MTD-ready.
