Self-employed workers will face significant shifts in how they report their tax filings from 2026. The government is introducing a new system to modernise tax reporting, requiring digital record-keeping and quarterly updates.
The changes, designed to improve efficiency and streamline processes, aim to bring the UK’s tax system into the digital age. Sole traders and landlords earning over £50,000 will be among the first to use the new Making Tax Digital (MTD) system, with a series of updates and regulations taking effect in just a few years.
The Transition to Digital Tax Reporting
From April 2026, sole traders and landlords will be mandated to use Making Tax Digital for Income Tax (MTD), a new initiative introduced by HM Revenue & Customs (HMRC). The initiative aims to phase out traditional methods of submitting tax returns in favour of digital systems, requiring taxpayers to create, store, and submit digital records.
This transition marks one of the most significant overhauls to the UK’s Self Assessment system since its inception in 1997. MTD will require self-employed individuals earning more than £50,000 annually to submit quarterly updates, as opposed to the traditional yearly tax return. The move is designed to reduce errors, improve real-time reporting, and ensure taxpayers pay the correct amount of tax.
According to HMRC, the introduction of MTD is expected to help businesses stay on top of their finances throughout the year. The government asserts that this change will also reduce last-minute tax filing stress, allowing for more evenly distributed workloads.
Impact on Self-Employed Individuals and Landlords
The requirement for quarterly updates is not only a significant change in how tax information is submitted but also how it is maintained. Self-employed individuals will need to keep digital records of their income and expenses, which they will update quarterly via approved software. This digitalisation of tax management aims to simplify the process and encourage efficiency.
Critics have raised concerns over the potential complexities, especially for small business owners who may struggle with the technology. However, the government maintains that the shift will ultimately benefit the economy by making tax reporting more transparent and easier to manage. James Murray MP, Exchequer Secretary to the Treasury, has expressed his support for MTD, emphasising its role in modernising the UK’s tax system to support economic growth.
As the system is rolled out, landlords will also be required to comply, with an expected 780,000 individuals initially impacted in 2026, followed by an additional 970,000 in 2027. Despite some concerns over the burden on small businesses, the government argues that MTD will lead to a more streamlined and efficient tax system, reducing administrative burdens in the long run.
