More than 860,000 people will have to file regular financial updates with HMRC from April as a new government tax programme is rolled out.
Sole traders and landlords earning more than £50,000 from self-employment and property will have to use the Making Tax Digital system from 6 April.
While some argue it will save time and make filing tax returns easier, others say the new files add “yet another administrative weight added to an already heavy load”.
Experts have warned some small business owners will have to file more than 10 financial updates a year if they are self-employed and a landlord.
The income threshold for using the system is set to fall over the next few years, meaning millions of Britons would have to comply.
We take a look at what Making Tax Digital is – and some of the concerns around it…
The new system is a UK government initiative aimed at modernising the tax system by getting businesses and landlords to keep digital records and submit quarterly tax updates to HMRC using compatible software.
Under the changes, sole traders will be forced to file at least five updates to HMRC every year – four quarterly updates on their income and expenses and an end of year tax return.
Pic: HMRC
If a self-employed person is also landlord, that doubles the amount of financial updates needed to be filed, and that doesn’t take into account VAT returns.
To start with, qualifying people earning more than £50,000 will have to use the system.
But those earning more than £30,000 – an estimated 970,000 people – will be required to use it from next April.
In 2028, those earning more than £20,000 will have to join the system.
Free software options are available, and once income and expenses are recorded, the software generates a simple summary to send to HMRC.
Penalty points will be given for each late submission, with a £200 penalty only applied once four points are reached.
This means occasional slip-ups won’t result in immediate fines.
The timeline for those using the system from this April is:
• 6 April 2026 – start keeping records using MTD
• 7 August 2026 – deadline to send first quarterly update
• 7 November 2026 – deadline to send second quarterly update
• 31 January 2027 – deadline to submit a self-assessment tax return in the usual way
• 7 February 2027 – deadline to send third quarterly update
• 7 May 2027 – deadline to send fourth quarterly update
• 7 August 2027 – deadline to send first quarterly update for 2027/28
• 7 November 2027 – deadline to send second quarterly update
• 31 January 2028 – deadline to submit your tax return using MTD
You can read more about the system here.
What do experts think about it?
Taryn Lee Johnston, owner of business publishing firm The FCM Group, said it felt like yet another hit for self-employed people and small businesses.
“Quarterly reporting under Making Tax Digital was sold as a way to modernise the system. The concern is not just frequency, but cost, time and mental bandwidth. Many small business owners do not have in-house finance teams,” she told Newspage.
“They will either need to pay accountants more or spend more hours on compliance rather than growing their businesses. At a time when the UK says it wants to encourage entrepreneurship and economic growth, increasing administrative burden sends a conflicting message.”
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Gwion Thomas, founder of sole trader and freelancer accounting app LITT, warned those affected not to leave it to the last minute.
“While HMRC’s goal of improving accuracy is positive, the priority now is preparation and I would advise people to get ready now before it’s too late. Don’t leave it to a last-minute scramble and understand what you need way ahead of April’s rollout,” he said.
But not everyone thinks it’s going to be a time-consuming shift…
Research from enterprise software company Sage shows that almost a quarter (23%) of business owners in the UK spend more than six hours filing their tax return.
Lisa Ewens, senior vice president for small business at Sage, said: “When costs are rising, working more shouldn’t be the only answer.
“Digital tax tools can help spread the workload across the year, reduce last-minute stress and give business owners back valuable time, while also giving them a clearer picture of what they owe throughout the year, so they can plan and budget with more confidence.
“With Making Tax Digital approaching in April, there’s a real opportunity for sole traders to make taxes simpler and far more manageable.”
