According to HM Revenue and Customs (HMRC), the changes form part of a phased rollout that will eventually extend to individuals earning more than £20,000 from self-employment or property income by April 2028.
The reform changes how taxpayers submit information to HMRC. Instead of filing a single annual Self Assessment return in the traditional way, affected individuals will need to maintain digital records and send quarterly updates through approved software.
HMRC has already begun warning customers about the deadlines and encouraging them to prepare before the new legal requirements come into force. The department said the rules will apply to sole traders and landlords whose qualifying income exceeds the relevant thresholds.
New Thresholds Will Expand Making Tax Digital Requirements
Making Tax Digital for Income Tax, often referred to as MTD, will be introduced gradually over three years. According to guidance published on GOV.UK, individuals with qualifying income above £50,000 during the 2024/25 tax year must begin using the system from 6 April 2026.
The second phase begins one year later. People with qualifying income above £30,000 during the 2025/26 tax year will be required to join the system from April 2027. Under current government plans, the threshold will then fall to £20,000 from April 2028.
HMRC defines qualifying income as gross income from self-employment and property before expenses are deducted. The rules do not apply to employment income taxed through PAYE, pensions, savings interest, dividends or partnership profit shares.
According to HMRC guidance, taxpayers affected by the scheme will need compatible software to create and store digital records, submit quarterly updates and complete a final declaration each year. The department also stated that software should be capable of linking to existing spreadsheets and accounting systems.
The tax authority noted that some people may qualify for exemptions, including those who are digitally excluded. Individuals granted an exemption will continue to file tax returns through the existing Self Assessment process.
HMRC Urges Landlords and Sole Traders to Prepare before Deadlines
HMRC has launched webinars and online guidance aimed at landlords, freelancers and sole traders, particularly those who manage their tax affairs without an accountant or bookkeeper. According to information issued by the department, the sessions are intended to explain who will be affected, what actions taxpayers must take and how digital reporting will work once the system becomes mandatory.
The guidance also states that HMRC will review taxpayers’ Self Assessment returns each year to determine whether their qualifying income exceeds the threshold. Those identified as falling within the scope of MTD will receive a letter confirming the date they must begin using the service.
HMRC added that taxpayers remain responsible for checking whether they need to join the system, even if they do not receive a notification letter.
The department has also clarified how the rules apply when income later falls below the threshold. According to official guidance, taxpayers already enrolled in MTD must generally remain within the system until their qualifying income has stayed below the threshold for three consecutive tax years.
People who permanently stop receiving self-employment or property income will no longer need to continue reporting through MTD after notifying HMRC and submitting their final updates.
