Making Tax Digital for sole traders: the £30,000 test and what starts on 6 April 2027

The short version

• The test is gross income, not profit. Qualifying income is your self-employment and property income before expenses, added together. A trader who sold £32,000 and spent £20,000 has qualifying income of £32,000.
• ”Over £30,000” means more than £30,000. Exactly £30,000 is not over the limit.
• The 2025 to 2026 tax return decides it. That return, covering 6 April 2025 to 5 April 2026, is due by 31 January 2027, which is a Sunday.
• You start on 6 April 2027 if you are over, unless you are exempt. From then you keep digital records in software, send four quarterly updates a year and submit your 2027 to 2028 tax return through software.
• HM Revenue and Customs (HMRC) will probably write to you, but do not rely on it. GOV.UK says that if you get no letter it is still your responsibility to check.

This guide is general information, not tax advice. It covers sole traders anywhere in the United Kingdom. If you also let out property, read the landlord guide too, because rent counts towards the same total.

Who is in and who is not

You are in if you are a sole trader or landlord registered for Self Assessment, you have self-employment or property income, and your qualifying income is over the limit for the year.

What counts: the total income from all your self-employment and property, taken from your return. If you have two trades, add them. If you own a rental jointly, count only your share.

What does not count: wages, dividends, State Pension and private pensions, and your share of profit as an individual partner in a partnership.

Part years: if you traded for only part of a year, HMRC annualises a sole trader’s income where it has the information. For example, six months of trading is doubled.

Changes to your return: if you amend your 2025 to 2026 return after 6 April 2027 and that raises your income, the increase does not count for working out whether you are in for 2027 to 2028.

The consultant’s salary is not self-employment income, so it is left out.

What you will have to do from 6 April 2027

1. Sign up for MTD for Income Tax and choose software that works with it. You need to be registered for Self Assessment and to have submitted a return in the last two years. Then you authorise your software, which you repeat about every 18 months.
2. Keep digital records of every sale and cost, with the amount, the date and the category, in that software. If your turnover is under £90,000 you may record only whether each item is income or an expense. Keep the records for at least five years after the 31 January deadline.
3. Send four quarterly updates a year. Each is a summary of totals by category, covering the tax year so far, sent through your software. The deadlines are 7 August, 7 November, 7 February and 7 May. You must send one even if you had no income or costs.
4. Submit your tax return through software. After the fourth update you check your figures, add your other income, and submit the return by 31 January after the end of the tax year, declaring that it is correct and complete. For 2027 to 2028 that is 31 January 2029. MTD does not change the dates you pay tax.

The software is not optional and a spreadsheet alone is not enough. GOV.UK describes two kinds: software that creates the records, and “bridging” software that reads records you keep in a spreadsheet and sends them to HMRC. If you use a spreadsheet and bridging software, the records must be digitally linked, and once a record has been created and sent in an update you must not move it between products by copying and pasting.

Our quarterly update dates guide has every date for 2027 to 2028 and 2028 to 2029.

Exemptions

An exemption means you do not use MTD, but you still file a Self Assessment return and keep your records as you do now.

• Automatic: for example, you have no National Insurance number, or you act as a personal representative of someone who has died.
• You must apply: the main one is being digitally excluded, meaning it is not reasonable for you to use compatible software for records, updates or your return. GOV.UK’s examples are age, health condition or disability stopping you using a computer, tablet or smartphone; being a practising member of a religious society or order whose beliefs are incompatible with digital communications; or having no internet access at home or work because of where you live and none suitable nearby. HMRC decides each case on its own facts. You apply by phone or letter, and HMRC aims to reply within 28 calendar days.
• Not accepted on their own: having filed a paper return before, not knowing accounting software, having few records, or the extra time and cost.
• Temporary exemptions for 2026 to 2027 (such as the SA109 non-residence page, trust income or averaging relief) last until April 2027 at the earliest, and GOV.UK says that if your qualifying income for 2025 to 2026 is over £30,000 you will need to use MTD from 2027 to 2028. Trustees, visiting performers and people providing qualifying care have separate exemptions in regulation 28 of the 2026 Regulations, so read the exemption guidance if that is you.

Penalties

The new penalties replace the old ones for returns and payments from the tax year you join, so the old penalties still apply to your 2025 to 2026 return due on 31 January 2027. GOV.UK also says that from April 2027 the new penalties apply to everyone who sends a personal Self Assessment return, including people who are exempt or under the limit, and that for them the penalty-point threshold is 2 points.

• Late quarterly updates and returns earn points. One point for each missed deadline. At four points you get a £200 penalty, and £200 each further missed deadline.
• No points for late updates in 2026 to 2027, and an easement announced for 2027 to 2028. GOV.UK’s penalties page gives no points for late updates in 2026 to 2027 only. Budget 2026 (28 October 2026) announced that people required to join MTD in April 2027 will not get penalty points for late quarterly updates in 2027 to 2028 (their first four quarterly updates). GOV.UK’s penalties guidance and the law had not been updated when we checked on 7 November 2026, so this is announced, not law. The announcement is about quarterly updates only: late returns and late payments still carry penalties, and updates must still be sent before you can submit your return. Plan to send on time.
• Late payment penalties are a percentage of the tax owed. GOV.UK’s penalties page says that for 2027 to 2028 they are 4% at day 15 and a further 4% at day 30, with no penalty in your first year if you pay within 30 days, plus an annual rate of 10% charged daily from day 31. Schedule 26 to the Finance Act 2021 as it stands shows 3% and 3%, so check GOV.UK again before you rely on the 4% figure. You only get the 30 days once, and they do not apply to payments on account. Interest works as now.
• Points expire after 24 months if you stay under four. You can appeal a point or penalty using the letter you receive.

A simple plan

1. Add up your gross income for 2025 to 2026 now. The kit’s calculator does it, or use the free checker.
2. File your 2025 to 2026 return on time, by 31 January 2027.
3. Look at the software finder on GOV.UK in February and March 2027, and pick before 6 April.
4. From 6 April 2027 record everything as you go.

Sources

Last checked 7 November 2026.

• Find out if and when you need to use Making Tax Digital for Income Tax, GOV.UK
• Work out your qualifying income, GOV.UK
• The Income Tax (Digital Obligations) Regulations 2026 (S.I. 2026/336), legislation.gov.uk
• Sign up for Making Tax Digital for Income Tax, GOV.UK
• Use Making Tax Digital for Income Tax: create digital records, send quarterly updates and submit your tax return, GOV.UK
• Find out if you can get an exemption and apply for an exemption, GOV.UK
• Penalties for Making Tax Digital for Income Tax, GOV.UK
• Choose the right software, GOV.UK
• Budget 2026, paragraph 6.152, HM Treasury, 28 October 2026
• Budget 2026: Overview of tax legislation and rates, paragraph 2.36, HM Treasury and HMRC

Changes to this guide

• 7 November 2026: Corrected the penalties section. It said GOV.UK describes no easement for 2027 to 2028; Budget 2026 has since announced no points for late quarterly updates in 2027 to 2028 for people required to join in April 2027. This is announced, not law. Also added that the new penalties apply from April 2027 to everyone who files a personal return.
• 28 October 2026: Published as a draft for review.

This guide is general information written from the official sources listed above and checked on 7 November 2026. It is not legal, tax or financial advice, and Plainfiles is not endorsed by any government body. Rules change, so check the linked official pages for your own situation. Written and designed by Plainfiles with the help of artificial intelligence (AI) tools, then checked against the official legislation and guidance listed in the sources. How we write and check our guides.