London side hustles and the £30,000 Making Tax Digital test

Londoners with a let flat or a side business, and more than £30,000 of rent and takings in the 2025 to 2026 tax year, will have to send HMRC quarterly updates from 6 April 2027. The year that decides it ended six months ago, and the test is turnover, not profit.

The change is Making Tax Digital for Income Tax. It has applied since 6 April 2026 to those whose qualifying income was over £50,000 in 2024 to 2025. They keep digital records and send HMRC an update every quarter through software, as well as filing a tax return. The line falls to £30,000 from 6 April 2027 and to £20,000 from 6 April 2028, based on 2026 to 2027.

Those thresholds sound aimed at sizeable businesses. They are not, because of one word in the definition.

Turnover, not profit

Qualifying income, in HMRC's words, is "your total income from self-employment and property. This is the amount before expenses (also known as turnover)". Not profit. Not what you actually kept.

Illustration, not a real client. A nurse in Lewisham earns a £38,000 salary. She lets out the one-bedroom flat she bought before moving in with her partner, at £1,750 a month, and runs a food stall at a weekend market that took £10,000 in the 2025 to 2026 tax year.

Her salary does not count. Employment income is outside the test, as are dividends from your own company, your share of partnership profit and pensions. But the rent does, all £21,000 of it, before the mortgage interest, the letting agent and the boiler repair. So does the stall's £10,000 of takings, however little was left after ingredients, pitch fees and the van. Her qualifying income is £31,000, because rent and self-employment takings are added together. On HMRC's test she is in from April 2027.

In London that profile is not hard to reach. Rents here mean a single let flat can do most of the work towards £30,000 on its own.

Do not wait for the letter

HMRC writes to people who need to join, based on their tax return. It is equally clear that the letter is not the trigger: "If you did not receive a letter, it is still your responsibility to check if and when you need to use Making Tax Digital for Income Tax".

So check your own numbers. Take your 2025 to 2026 return, or the figures that will go on it, and add your gross rent to your gross self-employment takings. If the total is over £30,000, plan for April 2027 now rather than next March.

If you are already in

For those who joined this April, the next date is close. The second quarterly update is due on 7 November.

There is some relief in this first year. HMRC will not apply penalty points for late quarterly updates in the 2026 to 2027 tax year. That does not make the updates optional: you still keep digital records and send them, and you cannot submit your tax return until you have. After this year, each late update earns a point, and for anyone required to use the system, four points bring a £200 penalty.

Treat this year as a rehearsal.

What to do this month

• Add up last year's gross rent and self-employment takings, before expenses, and see which side of £30,000 you fall. A short Making Tax Digital checker does the sum for you.

• If you are over, choose software that works with Making Tax Digital for Income Tax well before April, and try it on a month of real transactions.

• Keep business and personal spending in separate bank accounts. Quarterly records are far easier when every line belongs to the business.

• Put the four update deadlines in your diary: 7 August, 7 November, 7 February and 7 May.

• If you started a side business or began letting in the 2025 to 2026 tax year and are not already sending tax returns, HMRC expected to be told by 5 October. That date has passed, so register now rather than waiting for January.

Making Tax Digital does not change the rate of tax anyone pays. It changes how often HMRC sees your numbers. The people it catches out will not be the large landlords who already have an accountant. It will be the nurse with one flat and a market stall. If that sounds like you, the figures that decide it are already on paper: add them up before Christmas.

About the author

Harvey Dhillon is the founder and CEO of Zmartly, a UK accountancy firm for small businesses. He grew up in West London and worked in finance roles in investment banking, wealth management and private equity, starting at Barclays, before leaving in 2020 to build the firm. He is a Chartered Management Accountant (ACMA, CGMA).

Featured photo by Bruno Martins on Unsplash.