Making Tax Digital: What's Coming Next

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is now live for sole traders and landlords with qualifying income above £50,000. The next two waves will pull in hundreds of thousands more taxpayers over the following two tax years, and a parallel project on Corporation Tax is moving through consultation. If your income sits below the current £50,000 threshold, this is the window to prepare — not the window to wait.

Where MTD for ITSA stands today

From 6 April 2026, sole traders and landlords whose qualifying income from self-employment and property exceeded £50,000 in their 2024/25 tax return have been required to:

• Keep digital records of business and property income and expenses in MTD-compatible software
• Submit quarterly updates to HMRC (due one month after the end of each quarter)
• File an end-of-period statement for each income source, and a final declaration that replaces the old Self Assessment return

This first wave is the smallest of the three by headcount but the most administratively complex per taxpayer — high earners are more likely to have multiple income sources, agents, and bespoke accounting setups. HMRC has confirmed that a soft-landing period applies for the first year, with penalties for late quarterly submissions waived in most cases while taxpayers and agents bed in.

Our existing companion piece on MTD for landlords and self-employed walks through the live rules in detail. This article looks ahead to what is coming next.

April 2027: the £30,000 wave

The next expansion of MTD for ITSA is scheduled for 6 April 2027. From that date, the qualifying-income threshold drops from £50,000 to £30,000. The reference year is 2025/26 — the tax return you will file by 31 January 2027 — which means HMRC will look at the figures on that return to decide whether you are in scope for the following April.

This wave is materially larger than the first. HMRC’s own published impact assessment expects roughly 970,000 additional taxpayers to enter MTD for ITSA at the £30k threshold, on top of the ~780,000 already in scope at £50k. If you have side-business income, a single rental property, or a portfolio of freelance clients, this is the wave most likely to catch you.

The threshold is based on gross qualifying income from self-employment and property combined — not profit. Someone with £18,000 of rental income and £14,000 of freelance turnover is over the threshold even if their taxable profit is well below it.

April 2028: the £20,000 wave

A further reduction, to a £20,000 threshold, is scheduled for 6 April 2028, again confirmed in the Autumn Budget 2024. This will bring most working landlords and the majority of part-time sole traders into MTD for ITSA. HMRC has indicated that the £20k threshold may itself be reviewed before it takes effect, but at the time of writing the legislation and timetable are in place.

One important point: even after the £20k wave, taxpayers with combined qualifying income below £20,000 will remain outside MTD for ITSA and continue to file an annual Self Assessment return as today. Employed-only taxpayers, regardless of salary, are also out of scope — MTD for ITSA only applies to self-employment and property income.

MTD for Corporation Tax: still in consultation

Alongside the ITSA rollout, HMRC is working on Making Tax Digital for Corporation Tax (MTD for CT). The 2021 consultation set out the broad shape — digital record-keeping, quarterly updates, and a finalising annual return for incorporated businesses — but the project has been deliberately separated from MTD for ITSA and the government has confirmed it will not be mandated before April 2026, with the working assumption among practitioners now being a 2028 or later go-live at the earliest.

If you run a limited company, there is nothing to do today, but it is worth knowing the direction of travel: the underlying digital-record obligations are the same as for ITSA, and accounting software vendors are building MTD for CT on the same plumbing. Software you adopt now for personal MTD will, in most cases, extend cleanly to your company filings when the time comes.

What changes for your financial planning

MTD for ITSA does not change how much tax you owe — the rules on allowable expenses, capital allowances, and the trading and property allowances are unchanged. What it changes is the cadence and the visibility of your tax position.

• Cashflow timing. Quarterly updates do not in themselves trigger tax payments — the actual payment dates (31 January and 31 July under the Payments on Account regime) are unaffected. But seeing your year-to-date tax position four times a year tends to surface surprises earlier, which is generally a good thing for cashflow planning.
• Profit forecasting. Quarterly digital records make it much easier to project full-year profit accurately as the year progresses — useful for pension contribution decisions, dividend timing for owner-managers, and gift-aid planning. Our financial planning tools let you feed an updated profit number into your plan at any point in the year and see the knock-on effect on retirement projections and IHT exposure.
• Pension contribution headroom. If you are a sole trader using carry-forward, the annual allowance you can use depends on your relevant UK earnings — which you will now know with much more confidence by month nine of the tax year rather than guessing in late March. That makes it easier to use the full allowance without overshooting.

How to prepare before your wave starts

The most expensive way to enter MTD for ITSA is unprepared on the day the rules bite. The cheapest way is to pick your software, set up your record-keeping habits, and run a parallel quarter or two voluntarily before mandation. Three practical steps:

1. Confirm which wave you are in. Look at your 2024/25 return for the £50k test (already live), your 2025/26 return for the £30k test (April 2027), and your 2026/27 return for the £20k test (April 2028). Gross qualifying income, not profit.
2. Pick MTD-compatible software early. HMRC publishes an up-to-date list of recognised products. If you already use cloud accounting software (Xero, QuickBooks, FreeAgent, etc.), check whether your current plan includes MTD for ITSA submissions or requires an upgrade. Spreadsheet users can use “bridging software” that submits from Excel, but the digital-link rules are stricter than they look.
3. Talk to your accountant or adviser now, not next March. Agents are working through capacity constraints across the rollout. If you do not currently have an accountant and your situation is more than a single rental, finding a regulated adviser or an MTD-experienced accountant well ahead of mandation gives you the best choice of practitioner.

If you want to see the wider tax-year picture alongside MTD planning, our resources hub has companion articles on the 2026/27 tax year changes, pension annual allowance carry-forward, and the April 2027 IHT changes — all of which interact with the income decisions MTD will surface more frequently.

What is <em>not</em> changing

It is easy to read MTD coverage and assume everything about your tax life is about to change. It isn’t. To be clear about scope:

• Employed-only taxpayers (PAYE, no self-employment, no property income) are not in scope for MTD for ITSA, regardless of salary.
• Self Assessment returns continue to exist for taxpayers below the threshold and for those who file SA for other reasons (high income child benefit charge, capital gains above the annual exempt amount, foreign income, etc.).
• Tax rates, allowances, and reliefs are not changed by MTD — only the record-keeping and reporting cadence.
• VAT MTD has been live since 2019 and is unaffected by the ITSA rollout.

The headline takeaway: MTD for ITSA is a real and growing obligation if you have self-employment or property income, but it is a process change rather than a tax change. Preparation cost is mostly one-off; the ongoing burden is much smaller than the first quarter usually feels.