The Government Is Extending MTD for Income Tax in 2028
If you’re self-employed or a landlord, you must prepare for a significant change in how you report your income to HMRC under MTD for Income Tax rules.
From April 2028, HMRC announced several policy changes. These include lowering the threshold for Making Tax Digital for Income Tax Self Assessment (MTD ITSA) to £20,000.
How Will This Affect You?
Currently, MTD for Income Tax applies to those earning over £50,000 (starting in April 2026) and over £30,000 (from April 2027). But in April 2028, the threshold will be reduced to £20,000, bringing even more taxpayers into the system. Reducing the threshold means thousands more people will have to switch to compatible accounting software to manage their tax records and file returns with HMRC.
The extended MTD threshold will apply to the total turnover or gross income from sole trade self-employment and property income.
Here’s what you’ll need to do:
- Maintain digital records of your income and expenses.
- Use MTD-compliant software to submit quarterly updates to HMRC.
- Submit a final declaration at the end of the tax year, which includes all your income sources and tax reliefs.
No More HMRC Portal – MTD-compatible Software is Now Essential
One of the most significant shifts is that HMRC will no longer provide an online portal for final tax returns. Instead, everyone under MTD for Income Tax will have to use commercial software. Many taxpayers had hoped for a free government option, but that’s not happening.
If you currently file your tax return using HMRC’s system, this means added costs for the software and extra accounting support.
Who Doesn’t Have to Join MTD for Income Tax?
Some groups are exempt or have a delayed start, including:
- Those with Power of Attorney
- Non-UK resident entertainers and sportspeople with no other UK income
- Ministers of religion
- Lloyd’s Underwriters
- Recipients of blind person’s allowance or married couple’s allowance
- People using the remittance basis (MTD delayed until 2027 for them)
Choosing the Right MTD Software is Crucial
With so many MTD software options, picking the right one for your business is essential. Not all MTD software will suit the needs of all taxpayers. Some software is better for sole traders, while others suit landlords or those with multiple income sources.
When selecting MTD software, ask yourself:
- Is it HMRC-recognised?
- Does it cover all my income types?
- How easy is it to use?
- What are the costs—both now and in the future?
- Will it work with my current accounting setup?
Choosing software that doesn’t fit your business needs could result in missing important tax details or even non-compliance.
As Caroline Miskin, Senior Technical Manager, ICAEW Tax Faculty, said:
“Choosing a software product that meets all the taxpayer’s needs is imperative. However, many taxpayers won’t understand the differences between products or know what questions to ask.”
Don’t Leave It Until the Last Minute
Although 2026 and 2028 seem far away, preparing early will make the transition smoother. If you’re still using spreadsheets or paper records, now is the time to familiarise yourself with digital bookkeeping and MTD software.
Get Expert MTD for Income Tax Help
At Maynard Johns, we can help you understand these changes and find the best software solution for your business. Need advice? Contact us today.