Making Tax Digital is widening in 2027: what sole traders and practices should do now

What happened

Making Tax Digital (MTD) for Income Tax became mandatory on 6 April 2026 for sole traders and landlords with qualifying income above £50,000. In early November HMRC reminded those people that their second quarterly update was due by Saturday 7 November 2026, as reported by AOL.

That deadline has now passed, but the bigger story is what comes next. According to the same report, the rules widen to people with qualifying income over £30,000 from 6 April 2027, and over £20,000 from 6 April 2028. Many therapists, counsellors, tradespeople, self-employed consultants and small landlords who are not affected today will be within eighteen months.

What a quarterly update actually is

It is easy to assume this means four tax returns a year. It does not. Craig Ogilvie, HMRC's Director of Making Tax Digital, put it plainly: "Quarterly updates are not tax returns, no tax is due when they're sent".

A quarterly update is a summary of your income and expenses from self-employment and property, sent to HMRC using compatible software. Your overall tax is still worked out in the tax return for the year. HMRC also says you do not need specialist accounting software: a spreadsheet can be used if it is linked through what is called bridging software. If you spot a mistake in an earlier update, you correct your digital records and the fix flows into the next update, so the earlier one does not need sending again.

Some people are exempt, including those who are digitally excluded. If you think that applies to you, check HMRC's guidance or ask your accountant.

Why it matters to a small business or practice

The real change is not the form. It is that your records have to be kept digitally through the year, rather than pulled together from a shoebox of receipts in January. For a busy practice or trade, that is a habit change more than a technical one.

It also joins up with the rest of how you run the business. If bookings, invoices and payments already happen online, most of the numbers HMRC wants are already being recorded somewhere. If they live in a paper diary, text messages and a bank statement, each quarter becomes an evening of catching up.

Five things to do now

1. Find out when you are in. Look at your last tax return. If your income from self-employment and property together is above £30,000, plan to be ready for April 2027. Above £20,000, plan for April 2028. Ask your accountant to confirm what counts as qualifying income for you.
2. Pick how you will keep records. Choose software HMRC recognises, or keep your spreadsheet and add bridging software. Ask your accountant which they prefer to work with, because they may be the one sending the updates.
3. Start the habit early. Record income and expenses weekly from now, even though you do not have to yet. Ten minutes a week is far easier than a weekend every quarter.
4. Take payments and bookings online where you can. Online booking and card payments create a clean record automatically, so there is less to type in later and fewer gaps to explain.
5. Put the dates in your calendar. Once you are in, there is an update every quarter. Set a reminder two weeks before each one so it never becomes a last-minute job.

The bottom line

Making Tax Digital is already here for higher earners and is coming for many more sole traders in 2027 and 2028. The businesses that find it painless will be the ones whose bookings, invoices and payments are already digital. If you would like your website to take bookings and payments so the records keep themselves, get in touch and we will show you how it could work for your business.