Measure
The government has confirmed that Making Tax Digital (MTD) will be expanded to sole traders and landlords with gross annual business receipts in excess of £20,000 from April 2028.
This follows the confirmation at Autumn Budget 2024 that those with annual receipts above £50,000 will be mandated to join MTD from April 2026, followed by those with annual receipts over £30,000 from April 2027.
According to the government, there are around four million taxpayers with income below £20,000 and they will explore ways to “best bring the benefits of digitalisation” to them as part of the MTD rollout.
Individuals who complete residence pages on their tax returns will not be required to use MTD until April 2027, providing a one-year deferral for this group. This deferral is due to the challenges associated with the replacement of the non-domicile regime with a new regime for new UK residents.
Certain groups will, or may be able to, qualify for an exemption, including ministers of religion, individuals who benefit from Blind Persons’ Allowance and foreign entertainers.
HMRC will require MTD customers to file their tax return through MTD software instead of HMRC’s online filing service from April 2026.
Sole traders and landlords with business receipts in excess of the MTD thresholds.
The dates by which businesses will be mandated to use MTD are:
MTD customers will need to file their tax return through MTD software from April 2026.
The measures are part of the government’s efforts to modernise the tax system and make it more efficient. The government has previously stated that they expect the plans to reduce the tax gap through reducing errors in the records of small businesses. HMRC estimate that errors contribute £5.8 billion annually to the tax gap. The expansion of MTD to sole traders and landlords with annual income in excess of £20,000 from April 2028 was expected and brings 900,000 additional people into scope.
Mandating the use of MTD software is likely to increase costs for some taxpayers.