Making Tax Digital reaches the £30,000 workshop next April

From 6 April 2027, any sole trader whose turnover was over £30,000 in 2025/26 must keep digital records and report to HMRC every quarter. For many self-employed upholsterers, cabinet makers and polishers, that will be the first year it applies.

Making Tax Digital for Income Tax began on 6 April 2026 for sole traders and landlords with qualifying income over £50,000. HMRC's Director of Making Tax Digital, Craig Ogilvie, has called it "the most significant change to the Self Assessment regime since its introduction in 1997". The rollout now moves down the scale. The thresholds are set in law in the Income Tax (Digital Obligations) Regulations 2026.

Turnover, not profit

This is the point most likely to catch a maker out. Qualifying income is your income from self-employment and property before expenses. HMRC calls it "the amount before expenses (also known as turnover)". A workshop that bills £34,000 of commissions, repairs and restoration in a year but spends £12,000 of that on timber, fabric, foam and leather is still over £30,000.

Some income does not count towards qualifying income:

• wages from employment
• your share of profit as a partner in a partnership
• dividends, including from your own company
• pensions.

Directors of limited companies are caught only by any personal self-employment or property income they have. Partnerships are not yet in MTD for Income Tax.

HMRC's statistics put 1,077,000 people in the £30,000 to £50,000 band who join in April 2027, 798,000 of them self-employed only. A further 975,000 join at £20,000 in April 2028.

What you have to do

You need software recognised by HMRC that does three things:

• keeps digital records of income and expenses
• sends quarterly updates
• submits the final return by 31 January the following year.

HMRC says free products exist "for those with simple tax affairs", though they may limit the number of transactions. If you keep your books in a spreadsheet, bridging software can connect it to HMRC. Moving figures by copying and pasting or retyping them is not allowed, because the records must be digitally linked.

The records themselves are simple. For each income or expense you need the amount, the date and a category. If your turnover is under £90,000, the category can just be "income" or "expense". HMRC wants records made "as close to the date of the transaction as possible". A bank-feed app is allowed, but you still check the categories and add anything the feed misses.

The dates for the April 2027 group

Before that, you file your 2025/26 Self Assessment return in the usual way by 31 January 2027.

Quarterly updates are summaries, not payments. In HMRC's words: "Quarterly updates are not tax returns". You can send an update up to 10 days before the period ends, and each update replaces the year-to-date totals, so mistakes can be corrected next time. A quarter with no work still needs a nil update. Your tax bill and the 31 January payment date are unchanged.

Penalties, and no soft landing this time

Late filing works on points. You get one point for each missed deadline. Once you reach four points, you pay a £200 penalty, and another £200 for each further miss.

The April 2026 group had a concession: no penalty points for late quarterly updates in 2026/27. That concession was for that year only. HMRC confirms points apply to missed quarterly deadlines from 6 April 2027, so the £30,000 group starts with full penalties from its first quarter.

Late payment penalties start at 3 per cent of the tax owed at day 15 in 2026/27, rising to 4 per cent in 2027/28. A further charge applies at day 30, plus a daily rate after that.

Who is exempt

You are exempt automatically if your qualifying income is £20,000 or less, along with some specific groups.

You can also apply to be exempt if you are digitally excluded. That means it is not reasonable for you to use software because of age, health, disability, religious belief, or having no internet access at home or work and no suitable alternative. HMRC will not accept an application based only on:

• having filed on paper before
• being unfamiliar with software
• having few records
• the extra time or cost.

You apply by phone or letter, not online. People joining in April 2027 can apply now.

What to do this winter

• Look at your 2025/26 turnover, not profit, before your return is due on 31 January 2027.
• If it is over £30,000, choose software, or talk to your accountant, before April.
• Start keeping records digitally from the first day of the new tax year.

The professional body ICAEW has asked the government, in its submission for the Budget, to consider a soft landing for every group and to consider "delaying the rollout of the £30,000 cohort" until the scheme has been reviewed. The Budget is on 28 October 2026. Until it says otherwise, the April 2027 date stands.

This article summarises HMRC guidance and is not tax advice. Check your own position with HMRC or an accountant.