More than one million sole traders and landlords face a major change to the way they deal with HMRC, with just six months left to prepare.
Making Tax Digital (MTD) for Income Tax will become mandatory for around 1.1 million more people from April 6, 2027.
The change will affect sole traders and landlords with turnover of more than £30,000, who will have to keep digital records and use compatible software to send updates to HMRC.
HMRC is urging those affected to start preparing now rather than leave it until the last minute.
The tax authority said signing up early will give people time to check their details, choose suitable software and get used to the new system before it becomes compulsory.
Who will be affected?
From April 6, 2027, around 1,077,000 additional sole traders and landlords will be brought into Making Tax Digital for Income Tax, according to HMRC analysis of Self Assessment returns.
The £30,000 figure refers to turnover, rather than profit.
That means gross income from self-employment and property is counted before tax allowances or expenses are deducted.
Those who fall within the rules will need to keep digital records and use compatible software to send HMRC quarterly updates of their income and expenses, as well as complete their tax return.
However, HMRC stresses that the quarterly updates are not additional tax returns.
Instead, they are described as short summaries designed to keep digital records up to date throughout the year.
HMRC says this could also mean less time spent gathering paperwork and information when the annual tax return is due.
HMRC urges people to act now
Craig Ogilvie, HMRC’s Director of Making Tax Digital, said hundreds of thousands of sole traders and landlords are already using the system.
He said: “Hundreds of thousands of sole traders and landlords are already successfully using Making Tax Digital and now it’s time for the next group to get ready. “Signing up now means you can prepare and familiarise yourself with the process before it becomes mandatory next April.”
People affected by the April 2027 change can sign up now and choose software that works with Making Tax Digital.
HMRC says doing this early should give people time to make sure their details are correct and become familiar with the process before the rules take effect.
The £20,000 threshold is coming next
The April 2027 change will not be the final expansion of Making Tax Digital.
The threshold is due to fall again to £20,000 from April 2028, bringing an even wider group of sole traders and landlords into the system.
Making Tax Digital has already become mandatory for sole traders and landlords with income above £50,000, who have been using the system since April 2026. There are some exemptions, including for people who are digitally excluded, although HMRC says those who believe they qualify will need to apply for an exemption.