Making Tax Digital 2027: What Sole Traders Must Do Now

Making Tax Digital for Income Tax expands on 6 April 2027. If you are a sole trader or landlord, the next six months are an opportunity to put reliable records and a manageable reporting routine in place.

In its 5 October 2026 announcement, HMRC urged the next group to prepare. It estimates that approximately 1,077,000 additional sole traders and landlords will join. The timetable was already established: this announcement is a preparation reminder, rather than a newly introduced tax.

My advice is to start with how information moves through your business. Decide how each sale and expense reaches your records, who checks it and who submits the updates. That makes choosing software a much more useful exercise.

Who must use Making Tax Digital from April 2027?

Under HMRC’s eligibility guidance, sole traders and landlords with qualifying income over £30,000 in the 2025/26 tax year must use the system from 6 April 2027, unless an exemption applies. Qualifying income combines gross income from self employment and property before expenses and allowances.

This distinction matters. As an illustrative example, a sole trader with £38,000 of qualifying turnover and £15,000 of expenses has £23,000 left before tax, but still exceeds the £30,000 entry threshold. Someone with £25,000 of qualifying trading income and £8,000 of qualifying property income also exceeds it when the two are combined.

Check the relevant tax year and your actual income sources. Your total salary, business turnover and profit are different figures. Use HMRC’s checker or ask your accountant to confirm your position. Partnerships have a separate future timetable, and a fall in this year’s takings does not by itself establish that you can leave the system.

What changes in everyday bookkeeping?

Making Tax Digital requires digital records, compatible software, quarterly updates and completion of the annual tax return through suitable software. The quarterly updates are summaries, rather than four additional tax returns.

HMRC’s quarterly update guidance explains that submissions contain income and expense category totals. Updates are cumulative from the start of the reporting year, allowing corrected records to flow into a later update. Standard and calendar reporting periods have the same submission deadlines.

For someone first joining in April 2027, those deadlines are 7 August 2027, 7 November 2027, 7 February 2028 and 7 May 2028. These are reporting dates. Do not treat them as four new tax payment dates. Existing Self Assessment payment obligations, including payments on account where applicable, still need their own place in your cash forecast.

A quarterly estimate may also be incomplete until other income and year end adjustments are included. It should inform planning without being mistaken for a final bill.

Choose software around the work you actually do

Begin with HMRC’s compatible software guidance. Then ask the supplier to demonstrate the tasks you need, using a realistic example from your business.

Can you capture receipts easily on your phone? Can your accountant access the records? How will you handle refunds, platform fees or several income sources? What will the subscription cost after an introductory offer, and can you export your information if you later change supplier?

These are practical purchasing questions. A product that looks inexpensive can still create extra work if you must repeatedly move information between systems. Agree the setup with your accountant before committing.

A six month preparation plan

1. October: establish your starting point. Confirm whether you are in scope. List where invoices, receipts, bank transactions and cash records currently sit. Identify missing information.
2. November: agree responsibilities and software. Decide who records transactions, who reconciles them and who submits updates. Confirm which services your accountant’s fee includes.
3. December and January: test the routine. Work through real transactions, check totals against your records and investigate duplicates or unexplained differences. Keep a list of questions for your accountant. Testing bookkeeping does not mean sending unnecessary live submissions.
4. February and March: resolve problems. Check access permissions, backups and receipt capture. Follow HMRC’s sign up process for the correct start year, and put reporting dates and internal review dates into your calendar.
5. From April: maintain the process. Capture information regularly, review it each month and leave time for questions before each quarterly deadline.

A weekly appointment with your records is a practical starting point. The right frequency depends on transaction volume, but allowing months of unrecorded activity to accumulate makes both reporting and decision making harder.

What if digital reporting is difficult?

HMRC provides exemptions, including for people who are digitally excluded. Eligibility depends on individual circumstances. Its application guidance confirms that people due to start in April 2027 can apply now. An exemption from Making Tax Digital does not remove ordinary Self Assessment obligations.

Discuss genuine access or usability difficulties early. If you have an accountant, establish what they can do on your behalf before assuming that a particular task is impossible.

Do not assume the first year is penalty free

The concession for late quarterly updates applies to the 2026/27 tax year. It should not be assumed to cover someone starting in April 2027.

Under HMRC’s published penalty guidance, missed quarterly update deadlines after 2026/27 attract points. Reaching four points triggers a £200 penalty, with further £200 penalties for subsequent missed submission deadlines while at the threshold. Late annual returns also count. Payment penalties and interest are separate.

My view: build a routine you can sustain

Owners need financial records that are useful between tax deadlines. A regular review can help you spot an unpaid invoice, an unexpected subscription or work that generates less money than expected.

Digital reporting does not guarantee those benefits. They depend on accurate information and someone making time to use it. The commercial opportunity is to create a system that supports decisions as well as submissions.

This is the same practical discipline behind operations and process improvement. It also helps owners understand why more sales can leave a business with less money.

Start with your eligibility, agree the responsibilities and test the routine. Six months gives you room to solve small problems before they become deadline problems.

By Julian Frincu, Skills 2 Grow Business Journal. Published 6 October 2026. Requirements and dates are attributed to HMRC; the preparation plan and opinions are Julian’s business analysis. Examples are illustrative. This article provides general business information. Ask a suitably qualified accountant about your individual tax position.