HMRC MTD Letter? The £30,000 Threshold Explained
Sole traders earning over £30,000 must use Making Tax Digital from April 2027. Here is what triggers it, what to do before the January deadline, and where a limited company fits.
If you are a sole trader or landlord with qualifying income over £30,000 in the 2025 to 2026 tax year, you will need to use Making Tax Digital for Income Tax from 6 April 2027. HMRC works this out from your 2025 to 2026 Self Assessment return, which is due by 31 January 2027. That makes this winter the time to get ready.
This guide explains what triggers MTD, what it involves and how it compares with trading through a limited company. Information checked on 14 November 2026.
The MTD timetable
Making Tax Digital for Income Tax is being phased in by income level (GOV.UK: find out if and when you need to use MTD for Income Tax):
| Qualifying income over | Tax year tested | Use MTD from |
|---|---|---|
| £50,000 | 2024 to 2025 | 6 April 2026 |
| £30,000 | 2025 to 2026 | 6 April 2027 |
| £20,000 | 2026 to 2027 | 6 April 2028 |
Qualifying income is your combined gross income from self-employment and property, before expenses. Employment income, such as a salary from a job, does not count towards it.
Why you might get a letter from HMRC
HMRC checks your Self Assessment return for the tested year and writes to people who will need to start. The £50,000 group started in April 2026. The next group is decided by 2025 to 2026 returns, so letters about the April 2027 start will follow once those returns are filed.
If you file early, you find out early. Filing your 2025 to 2026 return in November or December rather than at the end of January gives you more time to choose software and change how you keep records before April.
What MTD for Income Tax involves
- Digital records: you keep records of income and expenses in software that works with MTD.
- Quarterly updates: you send a summary of income and expenses to HMRC every three months.
- A final return: after the tax year ends, you confirm your figures and any other income, replacing the traditional Self Assessment return.
For someone starting in April 2027, the first quarterly update is due by 7 August 2027. Updates do not involve paying tax each quarter. They give HMRC a running picture of your business.
Does MTD for Income Tax apply to limited companies?
No. MTD for Income Tax covers individuals with self-employment or property income. A limited company is a separate legal entity that pays Corporation Tax on its profits. As a director, the salary and dividends you take from your company do not count as qualifying income.
That does not mean a company has less admin. A company must keep proper accounting records, file annual accounts with Companies House, file a Company Tax Return with HMRC and send a confirmation statement every year. Many companies use accounting software for exactly the same reasons MTD exists.
Do not form a company only to avoid MTD. The admin moves rather than disappears. Choose the structure that suits your business.
When going limited does make sense
If MTD has prompted you to look at how you run your business, it is worth asking the bigger question. A limited company may suit you if:
- your income is growing and you want liability protection
- clients or platforms prefer to contract with a company
- you want to bring in a partner or investor
- you want a clear separation between business and personal finances
An accountant can compare your take-home pay as a sole trader and as a company director. Read our guide to sole trader versus limited company for the main differences.
What to do this winter
- File your 2025 to 2026 Self Assessment return early, well before 31 January 2027.
- Work out your qualifying income from self-employment and property combined.
- If you are over £30,000, choose MTD-compatible software and start using it before April.
- If you are thinking about forming a company, decide before you set up new systems, so you only change once.
FAQ
Is the £30,000 based on turnover or profit?
It is based on qualifying income, which is gross income from self-employment and property before expenses.
I earn £25,000 from my business and £10,000 from rent. Am I in?
Your qualifying income would be £35,000, which is over the threshold, so you would need to use MTD from April 2027 if that was your 2025 to 2026 income.
Does my salary from a job count?
No. Employment income is not qualifying income for MTD.
If I form a company, do I still file Self Assessment?
You may still need a Self Assessment return as a director, for example if you receive dividends above the allowance or have other untaxed income. Check HMRC's rules for your situation.
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