Key Rollout Timeline

• April 2026: MTD will apply to sole traders and landlords with income over £50,000.
• April 2027: The threshold lowers to include those earning over £30,000.
• April 2028: All self-employed individuals and landlords earning over £20,000 will be required to comply.

Those affected will need to file quarterly digital tax updates and submit an annual return using HMRC-approved software.

MTD May Expand Further

The government is also considering extending MTD to those earning less than £20,000, which would mean even more individuals would be required to purchase software and submit quarterly digital returns.

According to HMRC, it is continuing to explore “how we can best bring the benefits of digitalisation to a greater proportion of the four million sole traders and landlords who have income below the £20,000 threshold.”

Exemptions and Deferrals

Not everyone will need to comply. HMRC has identified certain groups who face disproportionate barriers, including:

• People with a power of attorney
• Non-UK resident entertainers or sportspeople with no other UK income
• Taxpayers for whom HMRC cannot provide a digital service

Additionally, the following groups are currently exempt from MTD:

• Ministers of religion
• Lloyd’s underwriters
• Recipients of Married Couple’s Allowance
• Recipients of Blind Person’s Allowance

Non-Domiciled Individuals and Residence Reporting

For those who use the SA109 schedule (to report residency and domicile status), MTD will be deferred until 2027, even if their income exceeds £50,000 in 2026.

HMRC has stated:
“Individuals will not be required to use MTD until April 2027 if they have information that they would need to submit using the SA109 schedule. This allows time to incorporate into MTD the government’s changes to the taxation of non-UK domiciled individuals.”

Industry Reactions and Concerns

While HMRC claims the phased rollout gives taxpayers time to prepare, industry professionals are raising red flags.

Roan Lavery, CEO of FreeAgent, commented:
“Any SMEs who were expecting good news in terms of tax relief or business support will be very disappointed… There are very few crumbs of comfort to be found from the Chancellor’s speech.”

The Association of Taxation Technicians (ATT) also expressed concern that the timeline is too tight.

Emma Rawson, Director of Public Policy at ATT, said:
“The April 2028 expansion of MTD will bring in lower income taxpayers, who may be less able to afford professional advice and specialist software. This makes having an efficient, simple MTD compliance process and clear guidance all the more important.”

Rawson warned that launching the next phase just two months after the first group completes their first year under MTD doesn’t allow time to assess and fix any issues.

Summary

From 2026 to 2028, more and more sole traders and landlords will be required to transition to digital tax reporting. While the government hopes this modernisation will streamline processes, cost, complexity, and readiness remain key concerns—especially for lower-income taxpayers and those with more complex tax affairs.

Frequently Asked Questions (FAQs)