The UK government has announced a significant change to the way self-employed individuals and landlords report their income and expenses to HMRC. From April 2026, those earning over £50,000 from self-employment or property income will be required to submit quarterly reports to the taxman. The new system, known as Making Tax Digital (MTD) for Income Tax, aims to improve accuracy, reduce errors, and save time for taxpayers. However, it also places a greater administrative burden on individuals who may not be set up for quarterly reporting.
Who Will Be Affected?
The first wave of MTD for Income Tax will affect approximately 780,000 people, including sole traders and landlords with gross income over £50,000. Those earning between £30,000 and £50,000 will be added to the list in April 2027, and further expansion to those earning £20,000 or more will follow in 2028. The income threshold is based on gross income, not profits, which means even those making modest earnings after expenses could still be caught by the new rules.
- Sole traders and landlords with gross income over £50,000
- Those earning between £30,000 and £50,000 (April 2027)
- Those earning £20,000 or more (2028)
What Does MTD for Income Tax Entail?
MTD for Income Tax requires some landlords to keep digital records of their income and expenses, use compatible software to manage their tax affairs, and submit updates to HMRC every quarter.
“It’s not just about moving tax online – it’s about shifting to real-time reporting,” said Andy Wood, international tax expert at Tax Natives.
This means that landlords and sole traders will need to adjust how they manage their finances throughout the year, not just at tax return time.
| Key Features of MTD for Income Tax | ||
|---|---|---|
| Quarterly reporting | Digital record-keeping | Compatible software |
| Real-time reporting | Improved accuracy | Reduced errors |
Why Is MTD for Income Tax Happening?
The change is designed to improve accuracy, reduce errors, and save time for taxpayers. HMRC believes that the digital transition will help taxpayers stay on top of their obligations while offering a clearer picture of their tax position year-round. However, some experts caution that not all taxpayers will find the transition easy. While there are benefits to the system, especially for those already using cloud accounting software, others may face new costs, new software, and a steep learning curve.
- Improved accuracy and reduced errors
- Increased administrative burden
- New costs and software requirements
- Steep learning curve
Should You Sign Up Early?
HMRC is currently encouraging early adopters to join the MTD testing programme, giving them time to familiarise themselves with the new system and access dedicated support. “Signing up early is wise,” said Andy Wood. “It allows you to test-drive the system, work out any teething issues, and avoid a last-minute scramble in 2026.”
Taxpayers who prepare in advance will be in a far better position when the deadline hits. Key Takeaways:
* The MTD for Income Tax system will require quarterly reporting, digital record-keeping, and compatible software. * The system aims to improve accuracy, reduce errors, and save time for taxpayers. * The first wave of MTD for Income Tax will affect approximately 780,000 people. * Those earning between £30,000 and £50,000 will be added to the list in April 2027, and further expansion to those earning £20,000 or more will follow in 2028. * HMRC is encouraging early adopters to join the MTD testing programme to access dedicated support and familiarise themselves with the new system.