£20K threshold for Making Tax Digital Self Assessments expected from 2028

£20K threshold for Making Tax Digital Self Assessments expected from 2028

The government is looking at extending Making Tax Digital (MTD) to those with an income of less than £20,000, which it wants to pull into the MTD system, forcing them to report quarterly and buy software specifically for the purpose.

As part of the ongoing rollout of MTD, the government said it will continue to explore how to ‘bring the benefits of digitalisation to a greater proportion of the four million sole traders and landlords who have income below the £20,000 threshold’. 

MTD for Income Tax will begin in April 2026 for sole traders and landlords, but only those that have an income of over £50,000. This will be extended to those earning over £30,000 in 2027, then £20,000 in 2028. MTD means that individuals will have to file quarterly returns as well as do a year-end tax return through the system.

HMRC has said ‘this gives those sole traders and landlords the time they need to prepare for the changes’. According to HMRC, there are currently 900,000 sole traders who fall into this category

Certain individuals will be exempt from HMRC as the government believes there are some taxpayer groups who will face disproportionate barriers.

Those falling under the exempt criteria include people that have a power of attorney, non-UK residents that are entertainers or sports people with no other income, and taxpayers where HMRC cannot provide a digital service.

Additionally, four more groups will not have to join MTD, including ministers of religion, Lloyd’s underwriters, people that receive married couples’ allowance, and blind persons’ allowance.

MTD requires affected taxpayers to file four times a year using the software and file their annual tax return through software, which HMRC says will ‘improve the customer journey’. There will be legislation for this introduced before MTD for income tax begins in 2026.