HM Revenue and Customs (HMRC) is set to implement a major tax reform that will impact close to one million self-employed individuals and landlords in the UK. From April 6, 2026, those with income exceeding £50,000 will be required to adopt Making Tax Digital (MTD) for Income Tax, marking a significant shift toward digital tax management.
This change mandates digital record-keeping and quarterly income reporting, aimed at simplifying tax processes and saving substantial time for taxpayers. By maintaining digital records throughout the year, sole traders and landlords can avoid the traditionally time-consuming end-of-year tax return preparations.
The government anticipates that this modernization will allow business owners to concentrate more on their core operations, fostering economic growth as part of its broader Plan for Change. HMRC estimates approximately 780,000 individuals will need to comply by April 2026, with a further 970,000 joining the scheme from April 2027.
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MTD’s quarterly reporting system will distribute the tax workload more evenly over the year, providing a near real-time picture of tax obligations and helping businesses better manage their finances. HMRC encourages those eligible to join a testing program available on GOV.UK to prepare early. Tax agents can also register clients via the same platform.
James Murray MP, Exchequer Secretary to the Treasury, emphasized the importance of the MTD initiative, noting it as a vital step in transforming the UK’s tax system to promote growth and fairness. “Modernising tax management will help businesses operate more efficiently and productively, while ensuring everyone pays their fair share,” he said.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, described this as the most significant change to Self Assessment since it began in 1997. Ogilvie highlighted the benefits for the self-employed and landlords, assuring that early participation in the testing programme will give users valuable experience and access to dedicated support before MTD becomes compulsory.
Under the new rules, anyone earning over £50,000 from self-employment or property—gross income before expenses—must keep digital records, use compatible software, and submit quarterly updates to HMRC starting in 2026. The income threshold will lower to £30,000 in April 2027 and further to £20,000 in April 2028, gradually expanding the scope of MTD.
This phased rollout follows the successful introduction of MTD for VAT, currently used by over two million businesses, which has helped reduce errors and save time on tax dealings. Early adopters of MTD for VAT reported improved readiness for digital compliance and noted significant benefits, including fewer record-keeping mistakes.
By embracing Making Tax Digital for Income Tax, HMRC aims to modernise the tax system, making it more transparent and easier to navigate for millions of taxpayers across the UK.