Making Tax Digital for Income Tax has felt like a problem for bigger sole traders first. That is still true in the short term, but HMRC has now made clear that a much larger group will be pulled in from April 2028. Under a new policy paper published on 24 March, the mandation threshold is due to fall from £30,000 to £20,000 of qualifying income.
For smaller businesses, that matters because this is not a change to profit after expenses. HMRC says it will look at total turnover from self-employment and UK property income, added together, on your latest tax return. In plain English, plenty of people who do not think of themselves as “large enough” for new tax systems may end up inside the rules.
What has changed
The rollout is now more clearly phased. HMRC’s campaign material says Making Tax Digital for Income Tax starts from 6 April 2026 for people with turnover above £50,000, from 6 April 2027 for those above £30,000, and from 6 April 2028 for those above £20,000.
The new impact note says that last step could bring about 970,000 additional sole traders and landlords into scope. Those affected will need to keep digital records, use compatible software, send quarterly updates during the year, and then complete the end-of-year tax return through that software.
That does not mean every very small business is suddenly facing an immediate deadline. It does mean the direction of travel is now harder to ignore. If your income sits somewhere between £20,000 and £30,000, this has moved from vague future talk to a named threshold and a date on the calendar.
Why it matters for SMEs
For a lot of sole traders, landlords and side-business owners, the real issue is not the technology itself. It is the working habit behind it. Businesses that still rely on a year-end scramble, scattered receipts and half-finished spreadsheets may find quarterly reporting much more uncomfortable than firms that already keep things tidy month by month.
HMRC’s own note also says this lower-income group is generally less likely to use software or paid agents than people above the higher thresholds. That matters because the change can bring both one-off disruption and ongoing cost. Some businesses may choose free or low-cost software, while others may end up paying more accountancy fees if they want help with quarterly updates.
There is also a mindset issue here. Plenty of owners hear “£20,000” and think in terms of profit, wages they pay themselves, or what is left after costs. HMRC is talking about turnover before expenses. A part-time landlord, a tradesperson with a modest turnover, or someone combining self-employment with property income could cross the line sooner than expected.
What smaller businesses should do now
First, work out whether your latest tax return puts you anywhere near the future thresholds. Look at gross income from self-employment and property together, not just one stream on its own and not just profit. If you are already hovering around £20,000, this is worth treating as a medium-term project rather than a distant policy story.
Second, get honest about your record keeping. If invoices, expenses and mileage are still spread across paper, email and memory, the job is not really about “MTD readiness”. It is about building a routine that would survive quarterly reporting without creating panic every few months.
Third, check your software position early. If you already use digital bookkeeping tools, ask whether they support Making Tax Digital for Income Tax properly. If you do not use software yet, start looking at the options before the market gets busier and before the learning curve becomes urgent.
Fourth, if you want the broader picture, our guide to Making Tax Digital for Income Tax covers the basics of what HMRC expects and how smaller firms can prepare in practical terms.
The practical takeaway
The headline is simple: Making Tax Digital for Income Tax is moving further down the small-business ladder. The new £20,000 threshold does not bite until April 2028, but it gives smaller sole traders and landlords a clearer warning than they had before.
For British SMEs, the sensible move is not to panic and not to leave it until 2028 either. If your turnover could put you near the line, use the next couple of years to tighten records, choose software carefully and make sure you understand what HMRC counts as qualifying income. The businesses that cope best with this kind of change are usually the ones that start early while the stakes still feel manageable.
Sources
- HM Revenue & Customs, Making Tax Digital for Income Tax Self Assessment — reducing the mandation threshold from £30,000 to £20,000 from April 2028, published 24 March 2026
- HM Revenue & Customs, Reduction of the mandation threshold from £30,000 to £20,000 from April 2028, published 24 March 2026
- HMRC campaign page, Get ready for Making Tax Digital for Income Tax, accessed 26 March 2026
