Thousands of workers could be hit with extra charges under HMRC tax shake-up

Making Tax Digital (MTD) is a new digital system that is being rolled out to more people from April 2026

Thousands of workers could face an extra bill from April under a major shake-up of the self-assessment tax system.

Making Tax Digital (MTD) is a new digital system that is being rolled out to more people from April 2026. All VAT-registered businesses have been required to use MTD-compatible software for Income Tax since 2022.

But from April 2026, sole traders and landlords with an annual income over £50,000 will be required to use the new tax reporting system.

It will cost an average of £320 to switch to MTD-compatible software, and then £110 a year after that. There is a list of third-party Making Tax Digital-compliant products on the GOV.UK.

MTD is slowly being introduced for lower income thresholds. The threshold will be lowered to £30,000 from April 2027, from to £20,000 from April 2028.

At the moment, those whose self-employed income is under £20,000 will not have to comply with MTD. Under the MTD system, you will have to report your earnings four times a year.

If you miss the deadline four times in two years, you will get four points and a £200 fine. The new deadlines for MTD are:

• August 7 for quarter 1 (April 6 to July 5)
• November 7 for quarter 2 (July 6 to October 5)
• February 7 for quarter 3 (October 6 to January 5)
• May 7 for quarter 4 (January 6 to April 5)

Under the current rules, you receive an immediate £100 fine if you submit your self-assessment tax return late. Last week, HMRC revealed 3.3 million people still need to file their self-assessment before the January 31 deadline.

This year’s deadline falls on a Saturday. HMRC’s phone lines are open Monday to Friday from 8am to 6pm.

Phone lines will close on Friday, January 30 and reopen on Monday, February 2 – after the deadline. HMRC said it will offer webchat support on Saturday January 31 through its online services helpdesk.

Earlier in January, HMRC apologised after its helplines were down for part of a day due to a short-lived technical issue.

HMRC will consider customers’ reasons for missing the deadline. Those with a reasonable excuse may avoid a penalty. People should also watch out for scams, with criminals purporting to be from HMRC.

An HMRC spokesperson said: “Working closely with businesses, agents and software providers, we’re on track to launch Making Tax Digital for Income Tax in April.

“This major reform will drive efficiency and raise more money for public services, as well as making it easier for taxpayers to stay on top of their affairs.”