Making Tax Digital Update
HMRC has confirmed that 864,000 self-employed workers and landlords will become eligible for Making Tax Digital (MTD) for Income Tax from April 2026. MTD comes into force at the beginning of the 2026/27 tax year, and requires those with a qualifying income (£50,000 or more) to file tax returns every three months using MTD-compliant software. An end-of-year submission will also be required.
Initially MTD will only affect those earning £50,000 or more, but the initiative will be rolled out to all self-employed workers and landlords by April 2028. The rollout is scheduled for those with incomes as follows:
- £50,000 for the 2024/25 tax year – MTD applies from 6 April 2026
- £30,000 for the 2025/26 tax year – MTD applies from 6 April 2027
- £20,000 for the 2026/27 tax year – MTD applies from 6 April 2028
HMRC said:
‘MTD for Income Tax is a new way for sole traders and landlords to report their income and expenses to HMRC. They will need to keep digital records and every quarter, submit simple summaries of their income and expenses to HMRC using compatible software. This is expected to reduce the tax gap by reducing the scope for error and failure to take reasonable care.’
The first quarterly filing date is set for 7 August 2026, and a new penalty system for non compliance will also be enforced.
How many will be affected by the MTD rollout?
In addition to the 864,000 individuals predicted to be affected by MTD in April 2026, a further 1,077,000 taxpayers will be eligible for the scheme in April 2027 and 975,000 in April 2028. In total, roughly 2,916,000 individuals – around 42% of self-employed workers and landlords – are thought to become eligible in the next three years.
According to Accountancy Age, agent representation plays a significant role in adoption, with some 65% of eligible taxpayers being represented by an authorised agent. Those without agents present a greater problem for HMRC, as many do not currently use software tools to file their self-assessment returns.
Operational challenges for HMRC
Getting taxpayers ready for a digital transition poses operational challenges for HMRC. Software adoption, and education on quarterly recordkeeping and end of year digital submissions, will be critical especially for the 217,000 unrepresented individuals who qualify for MTD from April 2026.
Some 9.1 million taxpayers are thought to remain outside MTD requirements, including 4 million self-employed workers or landlords who will not be earning enough to adopt the system.
Preparing for MTD
If you will become eligible for MTD by April 2028, it’s recommended that you sign up voluntarily before the deadline. Giving yourself plenty of time to become familiar with the software and processes will ensure you can access help and be fully compliant by the time compliance becomes mandatory.
If you aren’t currently represented by an agent, but would like help to choose and implement software, contact a reputable accountant today.
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