The self-employed and landlords should start preparing now as it will soon be mandatory for them to use the HMRC’s Making Tax Digital for Income Tax
With less than a year to go, sole traders and landlords earning over £50,000 will be required to use Making Tax Digital (MTD) for Income Tax from April 6, 2026. This significant change will require these individuals to keep digital records and report their income to HM Revenue and Customs (HMRC), marking a time-saving shift in tax reporting.
By maintaining digital records throughout the year, sole traders and landlords can save hours previously spent collating information at tax return time. This allows them to focus more on their business activities, driving economic growth as part of our Plan for Change.
HMRC estimates that around 780,000 self-employed individuals and landlords will need to use MTD for Income Tax from April 2026, with an additional 970,000 joining from April 2027. In other news, DWP state pensioners are set to be given ‘extra £352’ completely free.
READ MORE: HMRC seven-year rule rule could land you with hefty tax bill if you don’t act nowREAD MORE: DWP and HMRC making major change to 10 benefits including Universal Credit
Quarterly updates will distribute the workload more evenly throughout the year, bringing the tax system closer to real-time reporting. This will help businesses stay on top of their finances and avoid the last-minute rush.
HMRC is encouraging eligible customers to sign up to a testing programme on GOV.UK and start preparing now. Agents can also register their clients via GOV.UK, reports the Daily Record.
James Murray MP, exchequer secretary to the Treasury, recently said: “MTD for Income Tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth. By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share. This is a crucial step in this government’s decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth.”
Craig Ogilvie, HMRC’s director of Making Tax Digital, said: “MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.”
“By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.”
READ MORE: 17 changes that could see you lose your Universal Credit payments – full list
Starting from April 2026, people earning qualifying income exceeding £50,000 will be required to maintain digital records, utilise MTD-compatible software and file quarterly updates of their earnings and expenditure to HMRC.
These digital obligations are designed to help enterprises save time through more streamlined record-keeping, minimise mistakes in tax computations, and offer a clearer understanding of their tax duties throughout the year. Qualifying income, which includes gross earnings from self-employment and property before any tax allowances or expenses are deducted, will be subject to new rules.
From April 2027, those with qualifying income above £30,000 will be required to use MTD for Income Tax. The threshold will then decrease to £20,000 from April 2028.
The gradual roll-out of MTD for Income Tax follows the successful implementation of MTD for VAT, which now aids over two million businesses in reducing errors and saving time on their tax affairs. Businesses that participated in the MTD for VAT testing phase were better equipped for the transition to quarterly reporting.
A 2021 independent report revealed that 69 per cent of mandated businesses experienced at least one benefit from MTD for VAT, while 67 per cent reported that it reduced the potential for mistakes in their record keeping.