Making Tax Digital Phase 2: The £30,000 Threshold From April 2027

The Phased Rollout, In Full

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA, often shortened to MTD IT) is being introduced in stages based on income level, rather than for all self-employed people and landlords at once. The staged thresholds announced so far:

If you're reading this because your income sits somewhere around the £30,000 mark, you are the group affected by the second wave, due to become mandatory from the 2027/28 tax year (starting 6 April 2027).

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How "Qualifying Income" Is Actually Worked Out

This is the single most misunderstood part of MTD thresholds. Qualifying income is:

• The gross turnover of any sole trader business(es) you run, plus
• The gross rental income from any UK property business, added together
• Before deducting any expenses, allowances, or reliefs.

The key trap: two modest income sources that individually look well below £30,000 can combine to cross the threshold, catching people who assumed they were exempt.

HMRC determines whether you're required to join based on the qualifying income reported in your Self Assessment return for a tax year approximately two years before the mandatory start date — so your 2025/26 tax return (filed by January 2027) is the one likely to determine your Phase 2 status for April 2027.

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What Changes Under MTD for Income Tax

Quarterly updates are summaries of income and expenses for each roughly-three-month period — not full tax calculations. The final declaration after the tax year end is where allowances, reliefs and the actual tax calculation are finalised, similar in spirit to the old Self Assessment return but built on top of the quarterly data already submitted.

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Landlords: A Specific Note

Property income from all UK properties you let out is aggregated for the qualifying income test, regardless of how many individual properties or tenancies are involved. A landlord with three modest buy-to-let properties generating £11,000 each (£33,000 combined gross rent) would be caught by Phase 2 even though no single property comes close to £30,000 alone.

Furnished holiday lettings, following the abolition of the separate FHL tax regime, are now treated as part of general property income for these purposes — check current HMRC guidance for exact treatment if this applies to you.

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Preparing Ahead of April 2027

1. Check your last two years of Self Assessment qualifying income to estimate whether you're likely to be caught by Phase 2.
2. Choose MTD-compatible software early. A wide range of providers, from simple mobile-based apps to full accounting packages, are HMRC-recognised — trialling one well before the mandatory date avoids a rushed transition.
3. Start keeping digital records now, even if not yet mandatory. Getting into the habit of digital, categorised record-keeping ahead of the deadline significantly reduces the disruption when quarterly reporting becomes compulsory.
4. Talk to your accountant or bookkeeper about how quarterly reporting will change their fee structure and your ongoing workload — many practices are restructuring their client processes specifically around MTD's quarterly cadence.
5. Don't assume exemption because you're currently under £30,000. Combined income across multiple sources, or income growth over the next year or two, could bring you into scope before the deadline arrives — and a further threshold reduction has already been signalled for a future date.

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Exemptions

HMRC has confirmed that certain groups can apply for exemption from MTD for Income Tax, including those unable to use digital tools due to age, disability, remoteness of location, religious belief, or other reasonable cause recognised under the existing "digital exclusion" provisions already used for MTD VAT. Anyone who believes they may qualify should check the current exemption criteria and application process on gov.uk well ahead of their mandatory start date, since applications need to be assessed and approved before the deadline, not after non-compliance has already occurred.