The significant change will require these people to keep digital records and report their income to HM Revenue and Customs
With less than a year to go, sole traders and landlords earning more than £50,000 will be required to use Making Tax Digital (MTD) for Income Tax from April 6, 2026. This significant shift towards digital record-keeping and income reporting to HM Revenue and Customs (HMRC) is set to save time in the long run.
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 the 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.
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, has championed the new MTD for Income Tax as a cornerstone of the government’s strategy to revamp the UK’s tax system in favour of economic growth. “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.”
He hailed the initiative as a pivotal move in the government’s ambitious Plan for Change and its commitment to a decade of national renewal, aiming to dismantle obstacles impeding economic expansion. “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, underscored the significance of the changes, marking them as the most substantial since Self Assessment was introduced in 1997. “MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997,” he said. “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.”
Ogilvie also encouraged early adoption of the system, highlighting the benefits of joining the testing programme, which includes support from the MTD Customer Support Team. “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,” he said.
Starting April 2026, people with income over £50,000 will be required to maintain digital records, utilise MTD-compatible software, and submit quarterly summaries of their financial activities to HMRC.
The shift towards digital record-keeping is expected to streamline business operations, minimise tax calculation errors, and offer a more transparent view of tax responsibilities throughout the fiscal year.
Qualifying income includes gross income from self-employment and property before any tax allowances or expenses are deducted. Those with qualifying income above £30,000 will also be required to use MTD for Income Tax from April 2027.
The threshold will then decrease to £20,000 from April 2028.
The phased introduction of MTD for Income Tax follows the successful implementation of MTD for VAT, which now assists 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 prepared for the transition to quarterly reporting.
An independent report published in 2021 discovered 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.
