The UK government and HMRC are set to introduce substantial changes to the tax system, affecting self-employed individuals and landlords across the country. From April 6, 2026, anyone earning over £50,000 will be required to comply with Making Tax Digital (MTD) for Income Tax. This overhaul is expected to impact approximately 780,000 individuals initially, with an additional 970,000 joining in April 2027.
The new rules aim to improve the efficiency and accuracy of tax reporting. According to a report from BirminghamMail, HMRC anticipates that this system will revolutionize the way businesses manage their tax obligations. Here’s everything you need to know about these upcoming changes.
What is Making Tax Digital for Income Tax?
Making Tax Digital (MTD) is a government initiative that requires individuals and businesses to manage their taxes digitally. Instead of using traditional methods like paper-based returns, MTD mandates that taxpayers submit their records electronically. For self-employed individuals and landlords, this means quarterly updates to HMRC, rather than waiting until the end of the tax year.
MTD for Income Tax will become compulsory for anyone with income over £50,000 starting from April 2026. This change is expected to make tax filing more efficient, reduce errors, and encourage timely tax payments.
HMRC has stated that these changes are a crucial part of their broader plan to modernize the tax system. James Murray MP, Exchequer Secretary to the Treasury, explained,
“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.”
How Will These Changes Impact You?
The implementation of MTD for Income Tax is expected to affect over a million self-employed individuals and landlords across the UK. Initially, 780,000 self-employed people and landlords with incomes exceeding £50,000 will be required to adopt MTD starting in April 2026. These individuals will need to submit quarterly updates to HMRC, which will help spread out the workload and bring the tax system closer to real-time reporting.
The system aims to provide a more accurate record of earnings and tax obligations, helping businesses stay on top of their finances and avoid the rush of last-minute filings.
In April 2027, this requirement will extend to those with income exceeding £30,000, and by April 2028, the threshold will decrease further to £20,000. This gradual implementation ensures that more individuals can adapt to the system over time.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, highlighted the importance of this change, saying:
“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.”
When Will MTD Become Compulsory?
The first group required to implement MTD for Income Tax will be those with income over £50,000 starting April 6, 2026. The rules will then extend to those with income over £30,000 in April 2027, and finally, those earning over £20,000 will need to comply by April 2028.
This gradual rollout is designed to give individuals and businesses time to prepare. To assist with the transition, HMRC is encouraging those who will be affected to sign up for the MTD testing programme now. This will allow them to familiarize themselves with the new system and receive support before the rules become compulsory.
How Can You Prepare for the Changes?
HMRC strongly encourages self-employed individuals and landlords to sign up for the testing programme via the GOV.UK website. By doing so, individuals can get acquainted with the new process and receive dedicated support from the MTD Customer Support Team. This proactive step will ensure that taxpayers are ready when the changes become mandatory.
HMRC also advises investing in the right software for digital record-keeping and staying organized with financial documents. Familiarising yourself with these requirements now will help you avoid penalties and streamline your tax management in the future.
