Making Tax Digital 2027: do you need it, and what it means

Last updated: 29 October 2026

If you’re self-employed, a landlord, or both, the way you deal with HMRC is about to change. From 6 April 2027, anyone whose combined self-employment and property income was over £30,000 in 2025/26 has to keep their records digitally and send HMRC a short update every quarter, through software. HMRC calls it Making Tax Digital for Income Tax.

Most of what you’ll read about it is written by people selling that software. This guide is the plain version: whether you’re actually in, when, what you need to do, and what it costs you if you get it wrong. If you’re under the line, we’ll say so clearly.

Information, not advice. We don’t recommend products or providers. Check the official source linked below before you act.

Who has to use Making Tax Digital, and when?

It’s being phased in by income, using a figure from two tax years before you start. HMRC’s eligibility guidance sets out three steps:

• From 6 April 2026: qualifying income over £50,000 in 2024/25. This group has already started.
• From 6 April 2027: qualifying income over £30,000 in 2025/26. This is the big one, and the 2025/26 tax year has already ended, so your number is fixed.
• From 6 April 2028: qualifying income over £20,000 in 2026/27. HMRC confirmed this step in a policy paper on 24 March 2026.

“Over” matters. Exactly £30,000 is not in for 2027. And it only applies to people filing Self Assessment in their own name as sole traders or landlords. Partnerships don’t need to use it yet; HMRC says their timetable will be set out later. Profits made inside a limited company go through Corporation Tax and aren’t part of it at all.

HMRC looks at your Self Assessment return each year and will write to you if you’re over the threshold. But its guidance is blunt: if no letter arrives, it’s still your job to check.

Did the Budget change anything?

No. The Budget on 28 October 2026 mentioned only “the continued rollout of Making Tax Digital”. The thresholds and dates above stand. The one related announcement is further off: from April 2029, people who make payments on account will pay in smaller, more regular amounts. That doesn’t affect anything in this guide.

What counts as qualifying income (and what doesn’t)?

This is where most people go wrong, because the number HMRC uses is not the one you’re used to looking at.

Qualifying income is your gross self-employment income plus your gross property income, added together. Gross means turnover, before expenses. Your profit is irrelevant to this test.

What goes in:

• Turnover from every sole-trade business you run, added up.
• Rent from UK property, plus overseas property if you’re UK resident.
• For a jointly owned property, only your share. HMRC’s example: a property bringing in £50,000, owned equally with a sibling, gives each of you £25,000.

What stays out: wages from a job, your share of a partnership’s profits, dividends (including from your own company), the State Pension and private pensions.

The one thing not to miss: the test uses turnover, not profit. A van driver taking £38,000 with £24,000 of fuel and running costs makes £14,000 profit, and is still in from April 2027.

If you only started trading part-way through 2025/26, HMRC scales the figure up to a full year: six months of trading is doubled.

Check whether you’re in

Put in your 2025/26 figures. The checker tells you whether you’re in, out or on course for 2028, and if you’re in, lays out your first year’s deadlines.

You can also use it on its own at the Making Tax Digital checker, alongside our other free tools.

Three worked examples

Priya, hairdresser and landlord. Her salon chair brought in £26,000 in 2025/26 and she rents out a flat for £800 a month, £9,600 a year. Qualifying income: £26,000 + £9,600 = £35,600. That’s over £30,000, so she’s in from 6 April 2027. Her profit after costs is nearer £21,000, but that doesn’t come into it.

Dan, salaried with a buy-to-let. He earns £45,000 in a job and co-owns a house with his partner that rents for £40,000 a year. His share is £20,000. His salary doesn’t count, and £20,000 is not over £20,000, so he’s out for now. If the rent goes up to £42,000, his share becomes £21,000 and he’d be in from April 2028 if 2026/27 looks the same.

Hollie, Etsy on the side. She works full time and sold £12,000 of handmade jewellery in 2025/26. She’s out, with £8,000 of room under the lowest line. She still files a normal Self Assessment return, because she’s well over the £1,000 trading allowance. Our guide to tax on Vinted and eBay sales explains where that line sits.

What actually changes if you’re in?

Three things.

1. Digital records. You keep a record of each bit of income and each expense in software: the amount, the date and the category. A spreadsheet is fine if it’s digitally linked to compatible software that sends the figures to HMRC (often called bridging software). Once a record has gone to HMRC, you can’t copy and paste it across by hand.

2. Quarterly updates. Four times a year, your software sends HMRC a summary. Each one is cumulative, covering everything from 6 April up to the end of that quarter. For someone starting in April 2027, the first year looks like this:

There’s also a calendar-quarter option (quarters ending 30 June, 30 September, 31 December and 31 March) if that suits your books better. The deadlines are the same.

3. The tax return goes through your software. You still submit a return by 31 January after the tax year ends, confirming your figures and adding anything else, such as a salary or savings interest. It just goes through the same software instead of HMRC’s online form.

What doesn’t change: when you pay. HMRC’s guidance says Making Tax Digital “will not change the way you pay tax or the dates that payments are due”. That’s still 31 January and 31 July. Quarterly updates are reports, not payments. Our self-employed money basics guide covers setting money aside for those bills.

To sign up you need to be registered for Self Assessment and to have submitted a return in the last two years.

What happens if you miss a deadline?

Making Tax Digital comes with a points-based penalty system:

• One point for each quarterly update or tax return you send late.
• At four points, you pay a £200 penalty, and another £200 for each later late submission while you’re at four.
• A single point drops off after 24 months. Once you’re at four, you need 12 months of on-time submissions, with nothing outstanding, before they reset.

People who joined in April 2026 got a soft landing: no points for late quarterly updates in 2026/27. HMRC hasn’t extended that to the April 2027 group, so plan for the points to count from your first update. Late payment penalties are separate and still apply to unpaid tax.

Are you exempt?

Some people are automatically exempt. The main ones: qualifying income of £20,000 or less, no National Insurance number, trustees, personal representatives of someone who has died, and people whose affairs are run under a power of attorney or by a deputy because of incapacity. Others, such as ministers of religion or people claiming Married Couple’s Allowance or Blind Person’s Allowance, are exempt for now, and HMRC will set a future timetable.

You can also apply to be treated as digitally excluded if it isn’t reasonable for you to use software: because of age, health or disability; because of your religious beliefs; or because there’s no internet at home or work and nowhere suitable nearby. HMRC won’t accept “I’ve always used paper”, “I don’t know the software”, “I don’t have many records” or the extra cost as reasons on their own.

If you’re exempt, you still file a normal Self Assessment return.

Choosing software

Start with HMRC’s own list of compatible software. It asks a few questions and gives you a personalised list, and it includes free options for people with simple affairs (often with limits, such as a cap on transactions). If you have one small business or one rental property, check those first. HMRC doesn’t recommend any particular product.

If you’d rather pay for something with more help built in, three of the best-known names are FreeAgent, Xero and QuickBooks. Before you choose, check three things on HMRC’s list: that it covers income tax, not just VAT; that it handles property income if you’re a landlord; and that it can submit your tax return, not only the quarterly updates. If you already use an app or an accountant for your books, ask whether it’s on HMRC’s list before you buy anything new.

Frequently asked questions

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

Turnover. HMRC counts gross self-employment and property income before expenses, added together. A sole trader with £34,000 of sales and £20,000 of costs is over the line, even though their profit is £14,000.

Does my salary count towards Making Tax Digital?

No. Wages, partnership profit shares, dividends (including from your own company) and pensions are all left out. A high earner with a small side business can be well under the line.

When is the first quarterly update due if I start in April 2027?

By 7 August 2027, covering 6 April to 5 July. Then 7 November 2027, 7 February 2028 and 7 May 2028, with the 2027/28 tax return due by 31 January 2029. Your payment dates don’t change.

Can I use a spreadsheet?

Yes, if it’s digitally linked to compatible bridging software that sends the updates to HMRC. You can’t copy figures across by hand once a record has been sent.

What happens if I miss a quarterly update?

One penalty point per late update or return; at four points, a £200 penalty, and £200 for each later miss. Single points drop off after 24 months.

Did the October 2026 Budget change Making Tax Digital?

No. It referred only to “the continued rollout”. The £30,000 line from April 2027 and £20,000 from April 2028 stand.

Just so you know: this guide is information and journalism, not financial advice, and we don't recommend specific financial products. Your circumstances are your own — if you need personal advice, speak to a suitably qualified adviser. Information was correct at the "last updated" date above but things change; always check the linked primary sources.

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