Making Tax Digital for Income Tax will be introduced in less than a year for sole traders and landlords with an income above £50,000, HMRC has confirmed
With less than a year remaining until the implementation of Making Tax Digital (MTD) for Income Tax, sole traders and landlords earning over £50,000 are being urged to prepare. The new system, set to launch on April 6, 2026, represents a significant shift in how these individuals will maintain digital records and report their income to HM Revenue and Customs (HMRC).
The move towards maintaining digital records throughout the year is expected to save sole traders and landlords considerable time previously spent collating information for tax returns. The government hopes this efficiency will allow them to focus more on their business operations, thereby contributing to the economic growth needed for its Plan for Change.
HMRC estimates that approximately 780,000 self-employed individuals and landlords will be required to use MTD for Income Tax from April 2026, with an additional 970,000 joining from April 2027.
The introduction of quarterly updates aims to distribute the workload more evenly across the year, bringing the tax system closer to real-time reporting. This change should help businesses manage their finances more effectively and avoid the last-minute rush associated with tax return deadlines.
HMRC is encouraging eligible customers to sign up for a testing programme on GOV.UK and begin preparations now. Agents can also register their clients via the same platform, reports the Daily Record.
James Murray MP, Exchequer Secretary to the Treasury, discussed the future of taxation in the UK highlighting the Making Tax Digital (MTD) initiative for Income Tax as a pivotal element of the government’s strategy. He stated: “MTD for Income Tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth. By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.
“This is a crucial step in this government’s decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth.”
Providing an insight from HM Revenue and Customs (HMRC), Craig Ogilvie, Director of Making Tax Digital, said: “MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.
“By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.”
From April 2026, individuals with income above £50,000 from business or property will be required to transition to digital record-keeping, utilising MTD-compatible software to submit quarterly updates on their finances to HMRC.
The adoption of such digital practices is projected to not only streamline the recording of financial transactions but also diminish computational mistakes and offer taxpayers a continuous understanding of their tax liabilities throughout the fiscal period.
Qualifying income encompasses gross income from self-employment and property prior to the deduction of any tax allowances or expenses. Individuals with qualifying income exceeding £30,000 will be obligated to utilise MTD for Income Tax starting from April 2027.
The threshold is set to decrease further to £20,000 commencing from April 2028.
The gradual roll-out of MTD for Income Tax comes on the heels of the successful implementation of MTD for VAT, which currently aids over two million businesses in minimising errors and saving time on their tax matters. Businesses that participated in the MTD for VAT testing phase were better equipped for the transition to quarterly reporting.
A 2021 independent report revealed that 69 per cent of mandated businesses reaped at least one benefit from MTD for VAT, while 67 per cent reported a reduction in potential record-keeping errors due to its use.