Government to expand MTD IT in April 2028, lowering threshold to £20,000

In a move that will bring hundreds of thousands of additional taxpayers into scope, the UK government confirmed yesterday it will lower the threshold for Making Tax Digital for Income Tax (MTD IT) from £50,000 to £20,000, effective April 2028.

The announcement, embedded in Chancellor Rachel Reeves’s Spring Statement, formalises a key expansion of the digital tax programme that will affect sole traders and landlords earning over £20,000 annually. The decision accelerates the timeline hinted at in last year’s Autumn Budget, and leaves little breathing room for tax authorities and software providers to prepare before rollout.

The first group of taxpayers will be required to join MTD in the 2026/27 tax year, with their initial self-assessment filings due by January 2028. The lowered threshold just two months later will bring an estimated 900,000 lower-income individuals into the regime.

The move marks a significant milestone in HMRC’s long-term strategy to fully digitise tax administration, a project that has encountered multiple delays and criticisms around readiness, usability, and cost—particularly for the self-employed.

New Exemptions and Deferrals

To mitigate some of the transition risks, the Spring Statement included a slate of exemptions and deferrals. Those holding powers of attorney, non-UK resident entertainers and athletes (with no other UK income), and individuals for whom HMRC “cannot provide a digital service” will be excluded from MTD.

However, ambiguity remains. HMRC’s statement offers little clarity on how individuals are expected to prove eligibility for the “digital service unavailable” exemption, particularly given that HMRC has now confirmed it will not provide its own online filing option for MTD users.

Other temporary deferrals include ministers of religion, Lloyd’s underwriters, and recipients of blind person’s allowance or married couple’s allowance. Individuals required to complete the SA109 form—typically used for non-residents and those on the remittance basis—will not be brought into MTD until April 2027.

End of HMRC Online Filing for MTD Returns

Perhaps most significantly, HMRC has confirmed that it will not offer an online service for filing MTD-compliant year-end tax returns. Taxpayers and agents will be required to use third-party software throughout the process, including quarterly updates and the final self-assessment submission—a move HMRC is calling a “full software journey.”

This policy shift raises concerns for both accountants and unrepresented taxpayers. Not all currently approved MTD software products support end-to-end filing, as HMRC’s minimum functional standards do not mandate such capability.

The result is a potentially fragmented experience, in which taxpayers may be forced to adopt separate software tools for quarterly updates and final returns. “This introduces a risk that many won’t realise until the 11th hour that they cannot complete their return with the tools they’ve selected,” one tax adviser warned.

Professional bodies, including the Association of Taxation Technicians (ATT), have flagged this issue in consultations with HMRC and the Treasury. While they welcome some of the newly announced deferrals, they remain concerned about software coverage for edge cases and lower-income taxpayers.

Looking Ahead

The expansion to include individuals earning over £20,000 is not expected to be the end of the road. In its statement, the government said it would continue to assess how best to bring the benefits of digitalisation to the roughly four million individuals with income below that threshold—leaving the door open for further mandates in future Parliaments.

Meanwhile, HMRC is working with software vendors and professional bodies to revise its approved software list, with the goal of providing clearer guidance to both advisers and individual taxpayers.

For now, the countdown to April 2028 begins in earnest. But with mounting pressure to deliver a coherent, affordable, and accessible tax filing experience, the clock is ticking not just for taxpayers—but for HMRC itself.