Millions of self-employed individuals and property landlords across the UK are being urged to prepare for a major overhaul of the tax system, set to be introduced in 2026.
What is Changing with Making Tax Digital?
From 6 April 2026, a new regime known as Making Tax Digital (MTD) for Income Tax will come into force. This initiative from HM Revenue & Customs (HMRC) mandates that self-employed workers and landlords with an annual gross income from these sources exceeding £50,000 must maintain digital records and submit quarterly tax updates.
These submissions must be made using HMRC-approved software, moving the tax reporting system closer to real-time. The government has labelled this shift as "significant" and promises it will be "ultimately time-saving" for businesses by spreading the administrative workload across the year.
Who Will Be Affected and When?
The initial wave in April 2026 will impact an estimated 780,000 people. The rules will then expand to include those with a qualifying income of more than £30,000 from April 2027, affecting a further 970,000 individuals. The threshold is scheduled to drop again to £20,000 from April 2028, bringing even more people into the MTD system.
It is crucial to note that qualifying income is calculated as the total gross income from self-employment or property before any tax-deductible expenses or allowances are applied.
Government's Rationale and Reaction
According to a statement on GOV.UK, the new system is designed to help sole traders and landlords save time by avoiding the traditional last-minute rush to complete an annual tax return. The government argues that this will allow business owners to focus more on their core activities, thereby driving economic growth.
James Murray MP, the Exchequer Secretary to the Treasury, reinforced this, stating: "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."
With the 2026 deadline approaching, affected taxpayers are advised to familiarise themselves with the digital requirements and explore compatible software solutions to ensure a smooth transition.
