2028 is Confirmed MTD Threshold Cut to £20,000 & Pulls Nearly One Million More Into Digital Tax Regime

MTD Threshold Cut to £20,000 Pulls Nearly One Million More Into Digital Tax Regime

HMRC has confirmed that almost one million extra sole traders and landlords will be required to keep digital tax records from 2028, after the government lowered the Making Tax Digital (MTD) income threshold from £30,000 to £20,000.

The change, set out in the Income Tax (Digital Obligations) Regulations 2026, brings around 970,000 individuals into mandatory quarterly reporting for the first time. Affected taxpayers must use MTD‑compatible software to maintain digital records and submit quarterly updates and a final return.

HMRC estimates £380 million in one‑off transition costs and a £101 million rise in ongoing compliance costs for those newly in scope. Free and low‑cost software options will be available, though some businesses may face higher accountancy fees or need to upgrade hardware.

The tax authority says digital record‑keeping will reduce errors and give taxpayers clearer, in‑year visibility of their liabilities. Exemptions remain for those unable to use digital tools due to age, disability, location or religious grounds.

HMRC will contact affected taxpayers directly ahead of the staged 2026 (£50,000), 2027 (£30,000) and 2028 (£20,000) rollouts.

Comment

Do not leave this too late.  We suggest all self employed and landlords with £20k turnover should start planning for MTD and migrating to approved software sooner than than later so that it is not left to a 'panic' decision in March 2028.