The £30,000 Making Tax Digital Threshold Is Coming: Why You Should Prepare Now
Making Tax Digital for Income Tax has now begun for some businesses, but many more will need to comply in 2027.
From this month (April 2026), sole traders and landlords earning over £50,000 must comply with the new rules. Starting April 2027, the Making Tax Digital threshold will decrease to £30,000, including a much larger number of people.
As a result of this change, many businesses that do not yet need to comply will have to prepare earlier than expected. Waiting can make the transition more difficult, especially if your current bookkeeping system is not yet ready.
Understanding what the next Making Tax Digital threshold means now allows you to make changes without pressure.
Who will be affected by the £30,000 threshold?
From April 2027, Making Tax Digital for Income Tax will apply to sole traders and landlords with a total gross income exceeding £30,000 per year.
This income figure reflects turnover before expenses, not profit. It also includes combined income from self-employment and property if you have both.
This means many small businesses that currently submit one Self Assessment return each year will need to keep digital records and submit updates throughout the year instead.
Even if your income is currently just below the limit, growth or changes in work could bring you within scope.
Why more businesses will need to change their bookkeeping
The drop from £50,000 to £30,000 will affect many small businesses, part-time businesses, and landlords who may not currently use accounting software.
Under Making Tax Digital, you must:
- Keep digital records
- Use compatible software
- Submit quarterly updates
- Submit a final declaration at the end of the tax year
This differs from the current system, where records can only be reviewed once a year before the Self Assessment deadline.
Because reporting occurs more frequently, bookkeeping must be maintained up to date throughout the year.
Why you should not wait until 2027
Although the £30,000 threshold does not come into effect until April 2027, leaving preparation until the last minute can cause issues.
Switching to software, organising records, and adapting to regular updates takes time. Many businesses find that changing systems while also trying to meet deadlines creates unnecessary pressure.
Preparing early allows you to transition gradually to digital records and ensure everything functions correctly before the rules come into effect.
It also minimises the risk of errors when quarterly reporting starts.
Software setup often takes longer than expected
One of the major shifts with Making Tax Digital is the need to use compatible software.
If you presently store records on paper or spreadsheets, you might need to switch to cloud accounting software. This includes:
- Choosing the right system
- Setting up your accounts correctly
- Importing existing records
- Learning how to use the software
- Making sure it links with HMRC
Trying to manage all of this alongside meeting tax deadlines can be challenging. Getting things organised early makes the process much easier.
Bookkeeping habits may need to change
Under the current system, some businesses only update their records once or twice a year. With Making Tax Digital, HMRC have moved away from this.
Quarterly updates require records to be maintained more frequently. This generally involves:
- Recording income regularly
- Keeping receipts organised
- Reconciling bank accounts
- Checking figures during the year
- Making sure submissions are ready on time
For many people, the greatest change is not the software but developing the habit of maintaining updated records.
Starting now makes this easier before the rules require it.
Preparing early reduces the risk of penalties
Making Tax Digital applies a points-based penalty system for late submissions. Repeatedly missing deadlines can result in financial penalties and interest charges.
Organising records from the start of the year makes it easier to submit updates on time.
If your bookkeeping is already well organised before the £30,000 threshold kicks in, the transition to MTD will seem like a minor adjustment rather than a significant shift.
How Rosemary Bookkeeping can help you prepare
Even if you are not yet impacted by Making Tax Digital, now is the right moment to ensure your bookkeeping is prepared for the future.
Your local Rosemary Bookkeeper can help you:
- Check whether the rules will apply to you
- Set up compatible software
- Organise your records correctly
- Keep your bookkeeping up to date
- Prepare for quarterly reporting
Getting ready early for the Making Tax Digital threshold changes will help you stay in control and avoid last-minute stress when they take effect.
