MTD Deadline will be extended till 2028 for £20,000 Threshold Incomes
As announced in the spring statement, the HMRC MTD will apply to the self-employed and landlords by April 6, 2026, who are earning above £50,000. This threshold was extended for individuals with an income of £20,000, making it mandatory for them to comply with MTD by 2028.
The 2028 extension has been a crucial step towards making tax digital to even the smallest of income thresholds, mandating more than 1 million more taxpayers to comply with HMRC MTD guidelines. The purpose is to get a larger number of self-employed to get registered with MTD, use HMRC recognized software and make income updates quarterly for more frequent income tracking.
The Blog discusses the HMRC 2028 regulations about MTD for self-assessment tax return, and helps you identify whether you fall within the threshold or are exempt from the tax.
Understanding Making Tax Digital (MTD)
MTD is one of the most crucial changes for the self-employed and changes the way you file your self-assessment tax return. It makes HMRC free from rendering services for Tax filing. Instead, you will be filing your self-assessment tax return through HMRC-recognised software. With MTD, you will need to provide HMRC updates about your income every quarter. This will help HMRC to let you know about your tax position and liability throughout the year. A final yearly tax return will be sent to HMRC, based on the income and tax details provided in the quarterly updates.
Key Takeaways
As announced on 26 March 2025, HMRC has updated their policy regarding MTD, which includes the following.
- People earning above £20,000 will be required to register for MTD with ITSA by April 2028.
- Taxpayers will need to use HMRC-approved software for submitting their income tax returns.
- Taxpayers selected to use calendar Quarter Reporting will need to join from April 1, instead of April 6
- HMRC will have the authority to waive or reset penalty points for late submissions and to withdraw financial penalties.
What Is the Scope of MTD For Income Tax?
Making Tax Digital will apply to the self-employed by April 6, 2026, for individuals earning income of more than £50,000. However, if your annual income is more than £30,000 for the tax year 2025 to 2026, you will have to register for MTD by 2027.
Similarly, sole traders with an income of more than £20,000 for the tax year 2026-2027 will be mandatory to register for MTD by April 6, 2028
This MTD threshold is applied to all sole trader income. Whether income from property or self-employment will require registration for MTD in the UK.
How MTD Extension Poses Challenges for Sole Traders?
As the government makes it mandatory for self-employed individuals earning below £20,000 to comply after April 6, 2028, the regulation brings a countless number of challenges. Carolina Miskin, the senior technical manager at ICAEW, talks about MTD for self-employed and calls this regulation too soon to be implemented.
According to Caroline Miskin, the system may become difficult to understand because there won’t be enough time to see how the rules actually work before the next stage of MTD is rolled out.
She points out that the change will bring in over 1 million new taxpayers, including many landlords with even one rental property, who will now be required to register. For these individuals, it could become costly and confusing to learn how to use MTD software and stay compliant.
Who Will Need to Comply with MTD for ITSA in 2028
All the self-employed individuals who meet the following threshold will have to register for Making Tax Digital for ITSA.
- Individuals Registered for Self-Assessment
- Self-Employed Earning more than £20,000
- Income Earned from Property and Self-Employment
Thus, any sole trader who meets the following threshold will have to register with Making Tax Digital in the UK. You can also choose to register voluntarily, even if you do not fall within the given threshold, making record-keeping and tax filing more organized.
Purpose of Sole trader MTD for £20,000 Threshold
The main purpose of MTD for sole traders with income as low as £20,000 is to make tax filing more efficient and accurate. Making Tax Digital offers numerous amounts of benefits for sole traders that including.
- To Avoid Unpaid Tax with Regular Income Updates
- Reduce Errors with Digital Record Keeping
- Get a Clear Understanding of Your Tax Position
- Implement Strategic Tax Decision-making
- Easily Prepare Your Final Year Tax Submission
- Secure and Organised Digital Records
Who is Exempted from MTD
Some taxpayers were exempted or got more time for MTD as per the following HMRC guidelines.
- Individuals with the power of attorney or managing their Affairs
- Foreign entertainer or sports person with casual UK Income
- People using SA109 pages in their self-assessment tax return
- Here are More People exempted from registering with MTD Religion Ministers
- Lloyd’s underwriters
- People in a married couple allowance
- People on the blind person allowance
Thus, these regulations provide greater flexibility and support to residents living in the UK and foreign Individuals to deal with the practical challenges of filing their self-assessment through MTD.
What Steps Sole Traders Need to take from 2028
Do you want to get registered with MTD to remain compliant with HMRC? Here’s what you can do as a sole trader, so you plan ahead of the 2028 MTD deadline and avoid potential penalties for late compliance.
Make Sure You Meet the Threshold
You need to make sure that you are compliant with the HMRC MTD regulations. Check your finances and income for each tax year to be aware whether you fall within the ITSA threshold provided by HMRC.
Choose a Software Compatible with MTD
Now, HMRC provides a list of software that you can use to register with MTD. You don’t need to register with the HMRC portal, but through MTD compatible software, you can interact directly with HMRC. Several software programs like Xero, QuickBooks, Sage and more are listed on the HMRC website, which can be used for Self-assessment tax filing under MTD.
Keep a Record Digitally from Now!
Adopt such record-keeping practices that would make the process of transitioning to MTD seamless. Avoid any manual paperwork recordkeeping and use a digital tool for recordkeeping and calculating tax so that it will be easy for you to register and transfer your data to the HMRC-recognised software for MTD.
Plan efficiently for Quarterly Reporting
In MTD for ITSA, you will need to submit your income quarterly to HMRC. You need effective planning of what strategies to apply and when so that you can optimise your tax position and reduce tax liabilities with HMRC.
How to Comply with MTD for ITSA from 2028
Complying with MTD is not that difficult, especially when you plan for it prior months or even from now. Registering from now, even if you don’t meet the threshold, will still be beneficial for accurate filing and enhance your business integrity with HMRC. Here’s how you can comply with HMRC MTD for ITSA from 2028
- Register for mtd through HMRC-compatible software
- Start keeping digital records through the software
- Provide quarterly updates about income to HMRC
- Submit the year-end tax return of your annual turnover
Conclusion: Get Complaint with MTD before April 2028
If you fall under the extended income threshold by the HMRC, which is £20,000 for the year 2028-2027, then you will have to register for MTD by 2028. A sole trader can plan from now and check their eligibility. This will help them have a better insights about your tax position and plan accordingly with MTD. Even registering a year before will make your tax filing process easier and error-free.
Want to make compliance and registration with MTD simplified and Stress-free? Lanop Business and Tax Advisors can help you make the MTD transition a smooth sale for you.
