The launch of Making Tax Digital on April 6, 2026 will mark a significant and time-saving change for certain people.
There are just over 40 days to go until new tax reporting measures come into force. The launch on April 6, 2026 will mark a significant and time-saving change for certain people in how to report taxable income to HM Revenue and Customs (HMRC).
HMRc estimates around 780,000 self-employed individuals and landlords will be required to use Making Tax Digital (MTD) for Income Tax from April, with a further 970,000 joining from April 2027. Taxpayers will need to comply with Making Tax Digital where their self-assessment tax return for 2024/25 includes gross income from sole trade self-employment and property of more than £50,000.
Failing to meet any of these requirements may result in penalties under a points-based system with points incurred for late submissions, not keeping digital tax records, and not using digital links.
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Once you reach a certain number of points, you will be charged a penalty. People could face future penalties of up to £200 based on points accrued.
When the changes come into force in April, it will require eligible landlords and sole trader individuals to keep income records digitally using software that’s compliant with Making Tax Digital.
Mike Parkes from Coconut, said: “Making Tax Digital for income tax has been coming for years and faced several delays. Now it’s time for people to get prepared.
“In practical terms, this means for each transaction, you’ll need to use. cloud-based accounting software to record the amount (income or expense), the date you received or paid it, the category – whether that’s travel, rent or materials, for example and whether it’s self-employment or property income.
“It’s the end of paper invoices and scrabbling around for receipts in the run-up to the self-assessment deadline.”
It’s important to be aware that 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
Sole traders and landlords will need compatible software to create digital records, send HMRC quarterly updates and submit your tax return using Making Tax Digital for Income Tax.
For anyone worried about the new process, HMRC is advising customers to join the testing programme.
HMRC explained: “It will give you the chance to get comfortable with the new system before it becomes mandatory and access to our dedicated support team – essentially a safety net while you learn the ropes.”
HMRC is keen to make people aware the change will not result in anyone having to file extra tax returns.
HMRC said: “The required quarterly updates are simple summaries that your software generates automatically. Think of it as digital bookkeeping that talks to HMRC four times a year, rather than cramming everything into January for your Self Assessment return.
“If you spot an error, you can fix it in the next update. More than 2,000 updates have been successfully submitted in the testing programme and the feedback from those involved has been encouragingly positive.”
HMRC also said customers will need compatible software, but there are free options available as well as ones you have to pay for.
The tax body added: “There isn’t a one size fits all – the key is finding which software works for your business. The software will give you real-time estimates of your tax bill throughout the year, helping with cash flow planning and avoiding nasty January surprises.
“If you’re already using spreadsheets or accounting software, you can get compatible software that connects to your existing records and meets the new requirements.”
Making Tax Digital director Craig Ogilvie recently said: “Tax is changing and with just six months until Making Tax Digital for Income Tax comes into effect, now’s the time to start preparing.
“MTD is about spreading your tax admin throughout the year instead of that January scramble to complete your Self Assessment return.
“There are free software options available, and early feedback from our testing participants shows the system is straightforward once you are familiar with it.”
You can sign up for the testing programme on GOV.UK.
