MTD April 2027: The £30,000 Band Explained

MTD for Income Tax April 2027: The £30,000 Band Explained

If your qualifying income from self-employment and property is over £30,000, Making Tax Digital for Income Tax applies to you from 6 April 2027. That means digital record keeping, quarterly updates to HMRC through compatible software, and a final declaration at the end of the year instead of the single Self Assessment return you file now. The first wave, over £50,000, started on 6 April 2026. A third wave, over £20,000, follows on 6 April 2028.

For a lot of one-van trades, the £30,000 band is the one that actually bites. Plenty of sole traders sat comfortably under the £50,000 line and watched the first wave go past. This one is much harder to be under.

The three thresholds, in order

From

Qualifying income over

6 April 2026

£50,000

6 April 2027

£30,000

6 April 2028

£20,000

Each wave brings in everyone above that line who was not already in. Once you are in, you stay in — you do not drop out because you had a quiet year, unless your income falls low enough for long enough that HMRC agrees you can leave.

What “qualifying income” actually means

This is where most trades get it wrong, and the mistake always goes the same way: people assume the threshold is measured on profit. It is not.

Qualifying income is your gross income — turnover before expenses — from self-employment and from property, added together.

So a sole-trader plumber turning over £46,000 who spends £18,000 on materials, van, fuel, tools and insurance, and takes £28,000 of profit, is not under the threshold. He is over it. His qualifying income is £46,000.

Add a rented-out flat on top and it goes up again — the rental income counts too, gross, and it counts even though it is a completely separate thing from the plumbing.

What does not count:

Employment income (PAYE wages from a job).

Dividends and most savings interest.

Income of a limited company. MTD for Income Tax applies to individuals, not companies. If you trade through a limited company, the company is outside this regime — although if you also have personal rental income or a side trade as an individual, those can still bring you in.

The year HMRC looks at

HMRC works out whether you are in from the tax return for the year two years before the start date. For the April 2027 wave, that is your 2025-26 Self Assessment return — the one due by 31 January 2027.

That has a useful consequence and an uncomfortable one. The useful part is that you can work out now, from a return you have either already filed or are about to file, whether you are in. The uncomfortable part is that the die is largely cast: the figures on that return decide it.

HMRC writes to people it believes are affected, but do not wait for a letter. Letters go astray, addresses go out of date, and the obligation sits with you either way.

What actually changes day to day

Four things.

1. Digital records

You must keep records of your business income and expenses digitally, in software that can talk to HMRC. A shoebox of receipts and a notepad is no longer enough on its own. Nor, strictly, is a spreadsheet — unless you use bridging software that connects it to HMRC.

For most trades, this means a bookkeeping app: something you photograph a receipt into on the way out of the merchants, and forget about.

2. Quarterly updates

Instead of one return, you send HMRC a summary of income and expenses four times a year, through the software. The standard quarters run 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April, with each update due by the 7th of the month after the quarter ends — so 7 August, 7 November, 7 February and 7 May.

There is an option to align quarters to calendar months (30 June, 30 September, 31 December, 31 March) if that suits your bookkeeping better. Ask your accountant which to pick before your first year rather than switching midway.

Two important points. First, these are summaries, not mini tax returns — you are not calculating tax four times a year. Second, they are cumulative and correctable: if you get something wrong in quarter one, you fix it in a later update rather than filing an amendment.

3. A final declaration

At the end of the tax year you finalise everything — adjustments, allowances, any other income like employment or dividends — and make a final declaration. This replaces the Self Assessment return. The deadline is still 31 January after the end of the tax year.

4. Separate reporting per income source

If you have a trade and a rental property, they are reported separately. Two sets of quarterly updates, one final declaration.

What does not change

Your payment dates do not move. Tax is still due 31 January and 31 July on the usual payments-on-account basis. MTD changes how you report, not when you pay. Anyone telling you that you will suddenly have to pay tax quarterly has got it wrong.

Who is exempt, and who might be

Some people are outside MTD for Income Tax entirely or can apply to be:

Digitally excluded — if it is not reasonably practicable for you to use digital tools because of age, disability, location (no reliable broadband or mobile signal) or religious belief. This is an application to HMRC, not something you decide for yourself.

Certain trusts, estates and specific circumstances where HMRC has confirmed the regime does not apply.

There are also groups HMRC has said will be brought in later or handled differently, including some partnerships. If your business is a partnership — two brothers running a building firm, say — check the current position with your accountant rather than assuming the sole-trader rules apply to you unchanged.

Late updates and penalties

HMRC operates a points-based approach to late submissions across Making Tax Digital, where missed deadlines accumulate points and a financial penalty follows once you reach the threshold, with separate penalties for paying late. The detail matters and the rules have been adjusted more than once, so check the current position on gov.uk or with your accountant rather than working from a number you read somewhere.

The practical takeaway is simpler: four deadlines a year is four chances to slip. Trades who leave the books until January have to change the habit, not just the software.

A month-by-month run-up plan

You have from now until April 2027. That is more than enough time if you use it, and not nearly enough if you leave it until March.

September to December 2026 — work out where you stand. Add up your gross self-employment turnover and any gross rental income for 2025-26. If the total is over £30,000, you are in from 6 April 2027. If you are within a few thousand either side, treat yourself as in — it is far cheaper to be ready and not need it.

January 2027 — file your 2025-26 return and confirm. Filing the return that determines your status is the natural moment to have the conversation with your accountant. Ask directly: am I in from April 2027, and what are you doing for me?

February 2027 — choose software. Pick from HMRC’s list of compatible software for Making Tax Digital for Income Tax. What matters for a trade is not the feature list, it is whether you will actually use it: does it have a phone app, can you photograph a receipt in ten seconds, does it read your bank feed, and does your accountant already work with it? If your accountant has a preferred package, that is usually the right answer — it saves fees at year end.

March 2027 — get your bank and bookkeeping straight. If you are still running business money through a personal current account, fix that now. A separate business account makes the bank feed clean and cuts your bookkeeping time dramatically. Connect the account, categorise a few months of history, and get used to the software while nothing is riding on it.

April to July 2027 — first quarter live. Your first quarterly update covers 6 April to 5 July 2027 and is due 7 August 2027. Do not aim to complete it on 6 August. Do fifteen minutes of receipt filing every Friday and the update becomes a five-minute job.

August 2027 onwards — settle into the rhythm. Most trades who get through the first two quarters report the same thing: the quarterly discipline is more work in April and less work in January, and knowing your numbers four times a year is quietly useful for pricing.

The hidden upside for a small trade business

It is easy to read all of this as another compliance burden landing on people who did not ask for it. Fair enough. But there is a real operational benefit buried in it.

If your books are up to date every quarter, you know your actual materials-to-labour ratio, your real cost per week of running the van, and whether the day rate you set eighteen months ago still stands up. Most sole traders price on feel and only discover the truth at year end, by which point the year is gone. Quarterly numbers make repricing a decision rather than a guess.

What this means for the money side of the business

Better numbers only help if there is enough work coming through the door to apply them to. Trade Pilot is free to join and charges per lead rather than a monthly subscription — you buy credits, and a credit is only spent when a real local job lands in your inbox. Each lead is sold to no more than three trades in the area, so you are not one of a dozen firms ringing the same homeowner. In a quiet quarter you pay nothing, which is exactly the flexibility a business filing quarterly figures wants.

FAQ

Is the £30,000 threshold based on profit or turnover?

Turnover. Qualifying income is gross income from self-employment and property before any expenses are deducted. A trade turning over £40,000 with £15,000 of costs is over the threshold, not under it.

Which year’s figures decide whether I am in from April 2027?

Your 2025-26 Self Assessment return — the return due by 31 January 2027. HMRC looks at the tax year two years before the start date.

Do I have to pay my tax quarterly under MTD?

No. Payment dates are unchanged: 31 January and 31 July, with payments on account as now. Only the reporting becomes quarterly.

I run a limited company. Does this apply to me?

Not to the company. MTD for Income Tax applies to individuals with self-employment or property income. If you draw a salary and dividends from your own company, that is outside this regime — but personal rental income or any sole-trade work you do alongside the company can still bring you in.

What if my income drops below £30,000 after I have joined?

You do not automatically leave. There are provisions for leaving if income falls and stays low, but they are not immediate and you need to follow HMRC’s process rather than simply stopping.

Do I need an accountant for this, or can I do it myself?

You can do it yourself with compatible software, and plenty of sole traders will. Where an accountant earns their fee is the final declaration, the adjustments and the choices you make in year one — quarter alignment, software, how you split trade and property. Get advice for the setup even if you handle the quarters yourself.

Related reading: MTD quarterly updates · Making Tax Digital for trades · best accounting software for MTD · a weekly bookkeeping system