HMRC is requiring compatible software for business and property income reporting under Making Tax Digital. From April 2028, the income threshold will drop to GBP 20,000, bringing more self‑employed individuals and landlords into the digital regime.
UK’s His Majesty’s Revenue and Customs (HMRC) has introduced regulations requiring the use of compatible software to submit information on business and property income and to maintain associated records. This information will be used to determine income tax liabilities under the Making Tax Digital (MTD) initiative.
In addition, HMRC has published a policy paper proposing to reduce the mandatory income threshold for digital submission of information from GBP 30,000 to GBP 20,000, effective from April 2028.
This measure reduces the MTD for Income Tax mandation threshold from GBP 30,000 to GBP 20,000, extending digital record‑keeping and quarterly submission obligations to additional self‑employed individuals and landlords.
Those within scope will keep digital records and use MTD‑compatible software to send quarterly updates of business and, or property income and expenditure and their end‑of‑year tax return. This will support improved accuracy, reduce errors, and encourage the wider adoption of digital tools across small businesses and landlords.
Policy objective
Lowering the MTD threshold supports the government’s aims to:
- improve the accuracy of tax reporting
- reduce avoidable errors
- provide a simpler, more modern digital tax system
- support long term tax administration reform‑term tax administration reform
The measure extends the benefits of digital record keeping to more small businesses and landlords while supporting longer term simplification.
Background to the measure
Originally announced at Budget 2015, and following formal consultation in 2016, HMRC implemented the first phase of MTD from April 2019 for VAT-registered businesses.
Building on the successful introduction of MTD for VAT, the government confirmed at Autumn Budget 2024 that MTD for Income Tax will be introduced for sole traders and landlords with income over GBP 50,000 from April 2026 and those with income over GBP 30,000 will be mandated from April 2027.
This further phase, extending MTD for Income Tax to sole traders and landlords with income over GBP 20,000 from April 2028 was announced at Spring Statement 2025.
MTD delivers significant monetised benefits as set out in the Exchequer Impacts section. Benefits will continue to accrue beyond the 5-year scorecard period. MTD will also deliver significant non-monetizable benefits. MTD is upgrading and modernising critical national IT infrastructure for the VAT and ITSA regimes. The evaluation of MTD for VAT provides evidence that MTD offers wider productivity and time savings benefits for some businesses. MTD for Income Tax will support the wider digitisation and productivity of UK businesses and provide a technological foundation for future innovation.
Earlier, the UK’s Finance (No. 2) Bill 2025-26 was granted Royal Assent on 18 March 2026.
