Hundreds of thousands of UK sole traders and landlords are being urged to prepare for sweeping tax reporting changes as Making Tax Digital (MTD) for Income Tax becomes mandatory from April 2026.
The reforms, introduced by HM Revenue and Customs, will require self-employed individuals and property owners with qualifying income above £50,000 to keep digital records and submit quarterly tax updates instead of relying primarily on the traditional annual self-assessment return.
The changes are part of the government’s long-running effort to modernise the tax system and reduce reporting errors.
Who will be affected?
From 6 April 2026, MTD will apply to individuals earning more than £50,000 from self-employment or property income. The threshold will fall in stages:
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April 2026: income above £50,000
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April 2027: income above £30,000
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April 2028: income above £20,000, subject to legislation
By 2028, nearly three million taxpayers are expected to fall within the regime.
Those affected will be required to keep digital records of income and expenses, submit four quarterly updates to HMRC during the tax year, and then complete a final end-of-year declaration confirming their tax position.
Quarterly submission deadlines are expected to fall on 7 August, 7 November, 7 February and 7 May.
Three steps to get ready
HMRC says businesses should begin preparing now and highlights three key steps.
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First, businesses should check their start date. Anyone with turnover above £50,000 will need to begin using recognised MTD-compatible software from April 2026.
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Second, taxpayers should choose suitable software. HMRC provides guidance on a range of options, including free and paid tools as well as bridging software for those who want to continue using spreadsheets.
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Third, businesses should sign up before their start date rather than waiting until the last minute to ensure everything is in place.
Rising awareness of the changes
Public awareness of the reforms appears to be growing rapidly.
New analysis of Google Trends data commissioned by record-keeping software firm Coconut found UK searches for “Making Tax Digital” reached their highest ever level in February 2026. Interest increased more than 600% compared with December 2025, suggesting many taxpayers are only now investigating how the changes will affect them.
Mike Parkes, technical director at Coconut, said early preparation will make the transition easier.
“Setting up digital record-keeping early and building reporting into a routine will make the transition far smoother,” he said.
Pressure on the accountancy sector
However, research from tax software provider TaxCalc suggests the transition could create capacity pressures in the accountancy sector.
According to HMRC estimates cited by the company, around 850,000 businesses will enter MTD in the first phase, with roughly 212,500 currently managing their tax affairs without an accountant.
A survey of 215 accountancy professionals found:
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48% say capacity shortages are already limiting growth
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36% cite excessive workload as their main source of stress
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47% plan to increase prices for MTD clients
Andy North, chief customer officer at TaxCalc, warned that businesses delaying preparation may struggle to find support.
“For unrepresented businesses that currently pay nothing for accountancy support, engaging an accountant late to meet MTD deadlines could mean jumping from £0 to a much higher-priced service,” he said.
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AI advice creating new risks
Research by accounting platform Dext found 93% of accountants report seeing serious errors in tax submissions where clients relied on free AI-generated advice.
Accountants are warning about the growing use of public artificial intelligence tools for tax guidance.
Paul Lodder, the company’s vice-president of accounting and product strategy, said digital tools can support record-keeping but should not replace professional advice when dealing with complex tax rules.
With the income threshold falling to £30,000 in 2027 and £20,000 the following year, advisers say the changes will soon affect a much broader group of freelancers, landlords and small business owners across the UK.
