Making Tax Digital from April 2027: what the £30,000 cohort should do now

HMRC is beginning a fresh Making Tax Digital for Income Tax awareness campaign in October 2026, and the next mandatory group has just over six months to prepare. If your 2025 to 2026 Self Assessment return shows qualifying income of more than £30,000 from self-employment and property, you will generally need to use Making Tax Digital for Income Tax from 6 April 2027 unless an exemption applies.

The key point is that the £30,000 test is not your taxable profit and it is not your total household income. HMRC defines qualifying income as gross income from self-employment and property before expenses are deducted. That means a business with £36,000 of sales and £18,000 of allowable costs can still be above the MTD qualifying-income threshold even though its profit is much lower.

First, work out whether the £30,000 threshold applies to you

HMRC says it will assess whether you need to join by looking at the Self Assessment return for the previous relevant tax year. For the 6 April 2027 start date, the reference year is 2025 to 2026. You should also check the figure yourself rather than waiting for a letter.

Qualifying income broadly combines gross self-employment income and gross property income. If you have more than one sole-trade business or more than one property source, the amounts can need to be considered together. Employment salary, pension income, savings interest and dividends are not part of this particular qualifying-income test, although they can still matter elsewhere in your Self Assessment tax position.

What changes from 6 April 2027?

If you are in scope, Making Tax Digital changes the bookkeeping and reporting rhythm rather than replacing Self Assessment entirely. You will need compatible software to create and keep digital records of your relevant business and property income and expenses, send quarterly updates to HMRC, and submit the year-end tax return through the MTD process.

Do not confuse qualifying income with profit

This is one of the easiest mistakes for sole traders and landlords to make. The MTD threshold is based on qualifying gross income before expenses, not the profit on which Income Tax is eventually calculated. A sole trader with £24,000 of turnover and £9,000 of gross rental income could therefore have £33,000 of qualifying income and fall within the April 2027 cohort, even if costs reduce the eventual taxable profits significantly.

The same distinction matters when reviewing a business that grew during 2025 to 2026. Looking only at the tax bill, drawings or bank balance can give the wrong answer. Use the figures that feed the relevant Self Assessment income boxes and HMRC's qualifying-income guidance.

What should you do in the next six months?

1. Check your 2025 to 2026 gross self-employment and property income and compare the combined qualifying amount with the more-than-£30,000 threshold.
2. Confirm that your 2025 to 2026 Self Assessment return is accurate and reflects any businesses or property income sources that started, stopped or changed during the year.
3. Decide whether you will manage MTD yourself or through an accountant or tax agent, and agree responsibilities early.
4. Choose compatible software and test how invoices, expenses, property records and bank transactions will get into it. Do not assume that software is HMRC-recognised for MTD just because it handles bookkeeping.
5. Start keeping the records digitally now. A few months of practice can reveal categorisation, bank-feed and document-capture gaps before the legal start date.
6. Review whether an exemption may apply if digital record keeping is genuinely not reasonable or another HMRC exemption category is relevant to your circumstances.

Should you volunteer before April 2027?

HMRC currently allows people who are not yet mandated to sign up voluntarily for MTD for Income Tax, including some people who expect to become mandatory from April 2027. Volunteering can be useful if you and your adviser deliberately want to test the end-to-end process, but it is not a step to take casually. Once you sign up for the current year, you may need to send quarterly updates for periods that have already passed, so read the HMRC sign-up guidance and confirm the implications first.

The penalty position is different from the first MTD year

HMRC has given the first mandatory cohort a temporary concession: it will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. That concession does not extend to quarterly updates for later tax years. HMRC's current penalties guidance says that, for tax years after 2026 to 2027, a missed quarterly update can generate a late-submission penalty point. The quarterly threshold is four points, after which a £200 penalty is charged, with further £200 penalties for additional missed deadlines while the threshold conditions continue.

That makes preparation before April more valuable than simply learning the rules. The practical objective is to have a dependable bookkeeping routine, software access and adviser responsibilities in place before the first 2027 to 2028 quarterly cycle begins.

Use the change to improve your bookkeeping, not just compliance

MTD can become another deadline if the records are still assembled retrospectively. A better approach is to use the six-month preparation window to shorten the gap between a transaction happening and it appearing correctly in the books. Regular invoice matching, expense capture, bank reconciliation and review of uncategorised transactions can make both the quarterly updates and normal business decisions easier.

For Cherry Money users, the sensible goal is the same: keep invoices, expenses, banking and tax records organised continuously, then use HMRC-recognised MTD software for the mandatory submission journey. Do not wait until April to discover whether the data flow, software or accountant hand-off actually works.