Sole traders and landlords earning over £50,000 will need to keep digital records and submit updates to HMRC four times a year.
Self-employed workers and landlords across the UK are facing a major shake-up to the tax system from today, April 6, as Making Tax Digital (MTD) for Income Tax comes into force.
The changes mean anyone earning more than £50,000 a year through self-employment or property income will no longer be able to rely on a single annual Self Assessment return. Instead, they will be required to keep digital records and send updates to HM Revenue and Customs (HMRC) every three months.
The new system is the biggest overhaul of the tax reporting process in decades, with more than 850,000 people expected to be affected in the first phase.
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According to the UK Government, the move is designed to reduce costly mistakes and bring the tax system in line with modern digital practices.
Exchequer Secretary to the Treasury, Dan Tomlinson, said: “Making Tax Digital for Income Tax is the biggest modernisation of the tax system for a generation.
“Under the current system, records are completed up to 21 months after transactions take place, increasing the risk of avoidable errors. Around £6billion is lost each year where Self Assessment business customers do not pay the correct tax.
“Keeping digital, up-to-date records reduces error, protecting revenue to fund vital public sector plans including reducing NHS backlogs and giving children the best start in life.
“It will also help customers stay on top of their finances throughout the year, reducing last-minute pressure and making the annual Self Assessment process quicker and easier to complete. Free software options are available to support those in scope.”
Under the new rules, affected taxpayers must use compatible software to record income and expenses, and submit quarterly updates, followed by a final declaration at the end of the tax year.
Those earning between £30,000 and £50,000 are expected to be brought into the system from April 2027.
While HMRC says the changes will make managing tax easier in the long run, research suggests many people are still unprepared, with confusion around what the rules mean and how to comply.
Failing to follow the new requirements could lead to penalties in future years, although the Government has confirmed there will be a softer approach to enforcement during the first year of rollout.
It’s important to be aware Making Tax Digital doesn’t apply to everybody all at once and will be phased in.
Making Tax Digital for Income Tax applies to those with incomes:
- Over £50,000 – from April 2026
- Over £30,000 – from April 2027
- Over £20,000 – from April 2028
What you need to do now
- Check if your income from self-employment or property exceeds £50,000
- Choose HMRC-compatible software
- Start keeping digital records of income and expenses
- Be ready to submit quarterly updates from April
- Speak to an accountant if you use one
Full details on Making Tax Digital can be found on GOV.UK.
