05 November 2026
For expats with UK rental property or self-employed income reported in the UK, Making Tax Digital for Income Tax (MTD) is one of the most significant administrative changes in recent years, and the Budget on 28 October 2026 shifted the position again. In this article, we explain how MTD applies to expats and what the Budget changes.
Since April 2026, sole traders and landlords with qualifying income over £50,000 in the 2024 to 2025 tax year must keep digital records using compatible software and send HMRC quarterly updates, alongside their annual tax return. The threshold falls to £30,000 from April 2027, based on 2025 to 2026 income, and to £20,000 from April 2028, based on 2026 to 2027 income.
Qualifying income is your total self-employment and property income before expenses. Employment income, pensions, dividends and partnership profit shares do not count. Because the test looks at gross rent rather than profit, a landlord with modest profits but substantial rental turnover can still be within scope.
Living abroad does not by itself take you outside MTD, but your tax residence changes which income is counted. If you are UK resident, HMRC’s guidance includes your self-employment income and both UK and foreign property income. If you are not, it includes your UK property income and any self-employment income declared on your UK return, but not foreign rental or overseas business income. This test only decides whether MTD applies. It does not change what is taxed, and you still report other income on your annual return as usual.
Many expats are not yet using MTD because of a temporary exemption linked to the residence pages of the tax return, known as the SA109. Anyone who included the SA109 in their 2024 to 2025 return is automatically exempt for 2026 to 2027. Anyone who reasonably expects to include it in either of the next two returns can apply for the same exemption.
The reasons for completing the SA109 go beyond non-residence. They include being resident in the UK and another country at the same time, split-year treatment in a year of arrival or departure, claims under the foreign income and gains regime for new arrivals, and overseas workday relief. The exemption can therefore apply to both expats abroad and recent arrivals.
The exemption is temporary. Unless another exemption applies, those covered by it will need to use MTD from 2027 to 2028 if their qualifying income is above the threshold that applies from then.
The Budget’s Overview of Tax Legislation and Rates states that the government will exempt what it calls “expected non-resident customers” from MTD until further notice, with secondary legislation due before April 2027. The Budget does not explain what an expected non-resident customer is, whether the exemption covers people who are already non-resident, or how to claim it. Until regulations and guidance are published, its scope remains unsettled. The Budget also does not say the wider SA109 exemption will be extended, so those relying on it should plan on the basis that it ends as scheduled unless HMRC confirms otherwise.
For those joining MTD in April 2027, the Budget confirmed that no late submission penalty points will apply to quarterly updates for 2027 to 2028. You must still send the updates, because you cannot submit the annual return without them.
If you are preparing to leave the UK, your likely residence in the year MTD would otherwise begin is now directly relevant, as the new exemption appears to be built around an expectation of non-residence. If you already live abroad with UK rental income, the key questions are whether your gross rent exceeds the threshold and, if so, whether any exemption will apply once the SA109 exemption ends. If you are arriving in the UK, your foreign rental income now counts, and your residence pages may give you a short period of exemption, but not a permanent one.
HMRC reviews each tax return and, where qualifying income is above the threshold, writes to confirm that MTD applies from the start of the following tax year. For an April 2027 start, this is based on the 2025 to 2026 return, due by 31 January 2027, which leaves a short window. If no letter arrives, you remain responsible for checking and signing up in time, so expats overseas should not wait for one.
If you are an expat with UK rental or self-employed income and would like clarity on whether and when Making Tax Digital applies to you, we would be glad to help. Please get in touch.