The £30,000 rule: how a rental property could pull your small business into Making Tax Digital
If you run a small business as a sole trader, you will have heard that Making Tax Digital for Income Tax arrived in April 2026. You may also have filed it under "not my problem yet", because your business turns over less than £50,000.
That could be true. But if you also let out a property, even a single flat, it is worth checking again. HMRC does not look at your business on its own, and the threshold is about to fall sharply.
What changed in April 2026
Since 6 April 2026, sole traders and landlords with qualifying income over £50,000 have had to keep digital records and send HMRC a summary of their income and expenses every quarter, using compatible software. At the end of the year, a final declaration filed from the same software replaces the familiar Self Assessment return.
That is only the first wave. The threshold drops to £30,000 from 6 April 2027 and to £20,000 from 6 April 2028. Whether you are in from April 2027 depends on your 2025–26 tax return, the one due by 31 January 2027. In other words, the figures that decide your start date are already fixed.
The detail sole traders miss
HMRC tests your qualifying income, and two features of that test catch people out.
It is combined. Qualifying income adds your self-employment income to your property income. Take a freelance graphic designer who turns over £21,000 a year and lets a flat for £1,000 a month. Neither income crosses £30,000 on its own, but together they come to £33,000. She is in from April 2027.
It is gross, not profit. The test uses turnover before expenses, and rent before mortgage interest, letting fees and repairs. A business with thin margins, or a rental that barely breaks even, can still push you well over the line.
If you own a property jointly, only your share of the rent counts. Income earned through a limited company does not count at all, because Making Tax Digital for Income Tax applies to individuals.
What quarterly reporting actually involves
Quarterly updates are summaries of income and expenses, not tax returns, and you do not pay tax quarterly. Each update covers the tax year to date, so you can correct an earlier figure in the next one.
The standard quarters end on 5 July, 5 October, 5 January and 5 April, with updates due on 7 August, 7 November, 7 February and 7 May. For everyone already in the scheme, the second update of the year is due by 7 November 2026. You still have to send one if nothing happened in the period.
If you are in scope through both a business and a property, you report each income source separately. The rental side has rules of its own, from what counts as an allowable expense to how jointly owned property is handled, and our guide to Making Tax Digital for landlords walks through them step by step.
How to get ready before April 2027
Do the sum now. Add your 2025–26 turnover to your gross rent for the same year. If the total is over £30,000, plan on starting in April 2027.
Separate the two sets of records. Keep business and property income and costs apart from the start, because each gets its own quarterly update.
Retire the shoebox of receipts. Paper records and a year-end scramble do not work when you report every three months. Tools that let you track rental expenses and scan receipts against each property make the quarterly figures a by-product of normal admin rather than a separate job.
Choose compatible software. Only software that works with HMRC's system can send your updates. HMRC publishes a list to help you find software that's compatible with Making Tax Digital for Income Tax, and you can filter it by income type. For the rental side, Making Tax Digital software built for landlords can produce the property quarterly update straight from the rent and expense records you already keep.
Practise before it counts. Run your records through the software for the January to April 2027 quarter, so your first real update, due 7 August 2027, is not your first attempt.
The bottom line
Making Tax Digital was sold as a change for bigger sole traders and landlords. From April 2027 it reaches far more people, and a modest business plus a single rental property is enough to qualify. Check your combined 2025–26 figures now, and you will have six months to get your records in order rather than six weeks.
Richard Samuel is Chief Executive of August, a property management platform built for UK landlords and HMRC-recognised for Making Tax Digital.