MTD for Income Tax: what Suffolk sole traders need to know

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax, or MTD for short, is HMRC's replacement for the Self Assessment tax return for sole traders and landlords. Instead of submitting one return a year, you will need to keep digital records of your income and expenses and send HMRC a summary every quarter using compatible software. At the end of the year, you will submit a final declaration to confirm your tax position.

It follows the same principle already applied to VAT, where digital record keeping and software submissions replaced paper-based returns.

The £30,000 threshold explained.

MTD is being introduced in phases based on income, not business structure. The first phase started in April 2026 for those earning over £50,000. The next phase begins on 6 April 2027, and this is the one that will bring many more sole traders and landlords into scope.

From Qualifying income threshold Based on tax year

6 April 2026 Over £50,000 2024/25

6 April 2027 Over £30,000 2025/26

6 April 2028 Over £20,000 2026/27

If your qualifying income was over £30,000 in the 2025/26 tax year, HMRC will expect you to be using MTD from 6 April 2027 onwards.

What counts as qualifying income?

It is worth being precise here, because this is the detail that trips a lot of people up. Qualifying income means your gross income from self-employment and property, before you deduct any expenses. It is not your profit.

This matters because a sole trader with a healthy turnover but tight margins can easily be caught by the threshold even if what actually lands in the bank after costs is much lower. A trade with £45,000 in sales and £20,000 in costs still has qualifying income of £45,000, not £25,000.

If you have more than one source of qualifying income, for example a trade and a rental property, HMRC adds these together to work out whether you are over the threshold. Income from employment, pensions, dividends and savings interest is not included.

Who does this affect?

You are in scope for the April 2027 phase if you are a sole trader or landlord and your combined trading and property income was over £30,000 in the 2025/26 tax year. This includes self-employed tradespeople, consultants, therapists, and anyone letting out property as an individual. It also applies to those running more than one small business or side income alongside employment, where the self-employment and property income together clear the threshold.

Limited companies are not affected by this particular change, since MTD applies to Income Tax and Class 4 National Insurance, not Corporation Tax.

Partnerships are also not affected – this is purely for sole traders and landlords.

What you need to do before April 2027

Preparing for MTD does not need to be complicated, but it does need to happen before your start date rather than after it.

Start by checking your figures against the 2025/26 tax year. Since this is a gross figure, look at your total sales and rental income rather than your profit.

From there, it is worth moving to digital record keeping if you have not already. Spreadsheets on their own are not enough unless linked to bridging software, so most businesses find it easier to switch to proper cloud accounting software that is MTD compatible.

It also helps to get used to the quarterly rhythm ahead of time. Rather than gathering everything together once a year, you will need to update HMRC roughly every three months, so building good habits now, such as reconciling your bank account monthly, will make the transition far smoother.

Finally, talk to your accountant early. There is no need to wait until the year before your start date, and getting your systems set up well ahead of time avoids a rushed changeover.

Frequently asked questions

Do I have to register for MTD myself?

HMRC will use your submitted tax returns to identify whether you meet the threshold, but it is worth checking your own position rather than waiting to be told, particularly if your income is close to £30,000.

What happens if my income drops below £30,000 after I have joined?

If your qualifying income falls below the threshold for three consecutive tax years, you can come out of MTD and return to Self Assessment.

Can I join voluntarily before I am required to?

Yes. Businesses below the threshold can choose to sign up early, which some find helpful as a way of easing into the new process before it becomes compulsory.

Does MTD for Income Tax replace VAT reporting?

No. If you are VAT registered, MTD for VAT continues separately. MTD for Income Tax is specifically about your Income Tax and Class 4 National Insurance position.

Will I still get a tax bill once a year?

Yes. Quarterly updates are running totals rather than tax bills. Your final tax position is confirmed through your end-of-year declaration, and payment dates remain broadly the same as under Self Assessment.

Next Steps

If you think your income might bring you into MTD from April 2027, now is a good time to review your figures and get your record-keeping in order. Get in touch today for a chat. Please call the office on 01473 657853 to arrange a convenient time to discuss how we can support you and your business.