What the New £20,000 Requirement Means for Firms
HMRC has confirmed that the Making Tax Digital (MTD) for Income Tax Self-Assessment threshold will reduce to £20,000 of qualifying income from 6 April 2028. This extension continues the phased push to expand digital reporting for sole traders and unincorporated landlords.
Phased Rollout Summary
- 6 April 2026: MTD mandatory if turnover is > £50,000
- 6 April 2027: Threshold drops to £30,000
- 6 April 2028: Threshold drops to £20,000
“Qualifying income” in this context means gross self-employed and UK property income before deductions, not net profit.
Why This Matters for Practices
From 2028, a larger cohort of clients will fall into the digital reporting regime. Many sole traders and landlords currently outside scope will now need to:
- Maintain digital business records
- Submit quarterly summaries
- File a final digital declaration via MTD-compliant software
This isn’t just a compliance tick-box, it influences advisory workflows, software selection, client onboarding, and internal billing structures and if you don’t get this right, before you have a large percentage of clients that are required to do MTD then you’re in for a shock!
What Firms Should Be Doing Now
- Client Segmentation
Re-run income projections for clients near the new threshold to assess whether they will fall into MTD. - Software Alignment
Ensure your recommended software handles quarterly reporting and integrates with your workflow. Consider automation options to reduce manual data entry. - Communication Plans
Prepare clear client communication now. Many affected clients will not be thinking about the 2028 deadline yet and you will likely have to increase prices or require more contact from your client so make sure that they are aware of the changes coming and be transparent with any changes that you may be making in your practice. - Process Changes
Use this migration as an opportunity to standardise digital record-keeping practices, improve reconciliation standards, and build more consistent advisory conversations.
Advisory Opportunity
This expanded threshold isn’t just compliance pain, it’s a chance to strengthen client relationships:
- Champion better bookkeeping discipline
- Position your firm as the go-to partner for digital reporting
- Start to get clients into good habits now so that they are prepared for when they hit the threshold
