Making Tax Digital for Income Tax could apply to you from 6 April 2027 if you are a sole trader, a landlord, or both, with qualifying income of over £30,000 in the 2025/26 tax year.
This is phase two of the Making Tax Digital for Income Tax programme, or Making Tax Digital (MTD) wave 2 for short.
If you are affected by the April 2027 change, now is a good time to start planning. Getting your records and accounting processes organized early will make the move much smoother.
HMRC’s current guidance confirms that MTD for Income Tax will apply from 6 April 2027 to sole traders and landlords with qualifying income of over £30,000 in 2025/26.
What Is MTD Wave 2?
MTD Wave 2 is the next phase of MTD for Income Tax, which is being introduced in stages according to qualifying income. As HMRC say:
- If your qualifying income was over £50,000 in 2024/25, you must use MTD for Income Tax from 6 April 2026.
- If your qualifying income was over £30,000 in 2025/26, you must use MTD for Income Tax from 6 April 2027.
- If your qualifying income is over £20,000 in 2026/27, you must use MTD for Income Tax from 6 April 2028.
The April 2027 cohort is therefore the second group of taxpayers to join MTD for Income Tax.
Who Will Be Required to Use MTD from April 2027?
You might be required to join MTD for Income Tax from 6 April 2027 if you:
- Are a sole trader or landlord registered for Self-Assessment
- Receive income from self-employment, property, or both
- Have total qualifying income of over £30,000 for the 2025/26 tax year.
The £30,000 threshold is based on qualifying income, not profit, so do not assume you are below it just because your profit is less than £30,000.
HMRC’s online checker can help you find out if you should be using MTD and when you should start using it.
What Does Qualifying Income Mean?
Qualifying income is your total gross income from self-employment and property before any expenses are deducted. In other words, it is your turnover and rental income, not your profit.
It does not include employment (PAYE) wages, pensions, dividends, savings interest or income from a partnership. If you own a property jointly, only your share of the rental income counts. HMRC uses the information in your Self-Assessment tax return to decide whether you are over the threshold.
For example, you may be in the April 2027 wave if you are self-employed with turnover of over £30,000 in 2025/26.
The same applies if you are a landlord with rental income of over £30,000, or if your self-employment and property income together exceed £30,000.
If you think you are close to the limit, check your figures rather than assuming MTD does not apply.
What Changes Under Making Tax Digital?
MTD for Income Tax changes how you keep your records and report your income to HMRC.
Instead of reporting once a year, affected taxpayers must keep digital records and send quarterly updates of their income and expenses to HMRC using compatible software. The quarterly deadlines are 7 August, 7 November, 7 February and 7 May. After the end of the tax year, you submit a final declaration through your software by 31 January.
In short, MTD requires that your accounting records must be kept digitally and your data reported digitally using compatible software.
If you need to join MTD, HMRC advises that you sign up, choose compatible software and, if you use an accountant, authorise them to act for you.
Do You Still Need to Complete a Self-Assessment Tax Return?
Yes, for the tax year before you join MTD.
If you join MTD from 6 April 2027, you must still file your 2026/27 Self-Assessment tax return in the usual way by 31 January 2028.
From the 2027/28 tax year, your annual tax return is replaced by a final declaration made through your MTD software. This is also where you report any other income, such as employment income, dividends or interest.
Self-Assessment is not being abolished. MTD changes how your income and tax information is recorded and reported.
When to Prepare for MTD Wave 2?
There is no need to wait until April 2027. Starting early gives you time to:
- Check Whether MTD Applies to You
First, find out whether you are likely to fall under the April 2027 rules.
HMRC’s online checker asks about your tax returns, income sources and income levels for the relevant tax years.
- Review Your Current Records
Look at how you currently record:
- Sales and other business income
- Business expenses
- Property income, where applicable
- Receipts and invoices
- Bank transactions
- Additional information required for your tax return
If your records are mostly on paper or spread across different spreadsheets or systems, this is the perfect chance to bring them together.
- Choose Suitable Accounting Software
MTD for Income Tax requires compatible software.
Decide which software suits your business. If you already use accounting software, check whether it is compatible with MTD for Income Tax.
- Get Used to Digital Record-Keeping
Moving to digital record-keeping can take some getting used to.
Get into the habit of recording income and expenses regularly rather than leaving everything until the end of the year. This keeps your records accurate and helps you spot gaps early.
- Consider Using an Accountant
You do not have to do this on your own.
If you already use an accountant or tax adviser, speak to them about preparing for MTD wave 2.
An accountant can confirm whether the rules are likely to apply to you, review your current records and help you move to digital accounting.
What If You Don’t Have a Letter From HMRC?
Do not assume that you are outside the MTD rules just because you did not receive a letter.
HMRC reviews Self-Assessment tax returns each year and will write to people it identifies as being over the threshold to tell them they need to use MTD.
However, HMRC also makes clear that it is your responsibility to know whether and when you need to use MTD.
If you think you may be affected but have not received a letter, use HMRC’s online checker or speak to your tax adviser.
Are There Any Exemptions?
Not everyone who meets the criteria will have to use MTD.
HMRC explains the reasons for exemption in its guidance. For example, you may be able to apply for an exemption if you are digitally excluded, meaning it is not reasonably practical for you to use compatible software.
If you are exempt, you will not need to use MTD for Income Tax, but you will still need to report your income and gains through Self-Assessment.
Get Ready for MTD Wave 2 With Lexarox Accounts
Getting ready for Making Tax Digital does not have to be a headache. The key is to know when the rules apply to you and to get your records and software in order before then.
Lexarox Accounts supports sole traders, contractors, landlords and businesses with their accounts and tax. We can advise on MTD, including quarterly updates, as well as general accounts and tax support.
We work with cloud accounting software, including Xero and QuickBooks, and offer accounts and bookkeeping support to help you stay on top of your records.
If you are likely to be affected by MTD wave 2 from April 2027, taking professional advice early will help you understand your position and get your records in order well before the start date.
Mail us at info@lexaroxaccounts.co.uk or call us on 020 8533 1358, 07928 830368 or 07472 356282.
Address: Lexarox Accounts, Unit 128, 203-213 Mare Street, Hackney, London E8 3JS
Lastly
If your qualifying income was more than £30,000 in 2025/26, there is one date to remember: 6 April 2027.
MTD wave 2 brings the next phase of Making Tax Digital for Income Tax to affected sole traders and landlords. Rather than leaving it to the last minute, use the time ahead to check your position and get your records and software ready. Always check the latest HMRC guidance before making changes to your tax affairs.
Frequently Asked Questions
What is MTD wave 2?
MTD wave 2 is the second phase of Making Tax Digital for Income Tax due to come into effect from 6 April 2027.
Who needs to join MTD from April 2027?
Landlords and sole traders with qualifying income of more than £30,000 for the 2025/26 tax year could be affected by MTD from April 2027.
Is £30,000 profit the threshold?
No. The threshold relates to qualifying income and is not necessarily the same as profit or take-home pay.
Can an accountant help with MTD?
Yes. An accountant can assess your obligations, prepare your records, and calculate and submit your quarterly updates and final declaration.
Will landlords have to do MTD?
Yes. Landlords may have to do MTD if their qualifying property income exceeds the threshold.
Will sole traders have to do MTD?
Yes. Sole traders may have to do MTD if their qualifying income exceeds the threshold.
Do I still need to do a self-assessment?
Yes, for the tax year before you join MTD. After that, your annual return is replaced by a final declaration submitted through MTD software, which is also where you report your other income.
When should I prepare for MTD wave 2?
Now. Well before April 2027, check your position, organise your records and choose suitable accounting software.
Can I avoid doing MTD?
Some people can apply for an exemption, for example, if they are digitally excluded. Always check the latest HMRC rules rather than assuming MTD does not apply to you.
