Introduction
More than 860,000 sole traders and landlords in the UK are required to prepare for significant changes to income tax reporting as part of the government’s Making Tax Digital (MTD) initiative. From April, these individuals, earning above £50,000 in self-employment or from property, will need to adopt digital software for quarterly updates to HM Revenue & Customs (HMRC).
The new requirements reflect the government’s wider agenda to modernise tax administration, improve accuracy in reporting, and support economic growth. Those impacted are advised to begin preparations now, with new rules set to come into effect for the 2026-27 tax year.
New digital requirements for income tax
The MTD for Income Tax programme aims to shift eligible taxpayers from manual or paper-based systems to digital record-keeping. Beginning 6 April 2026, those with annual business or property income exceeding £50,000 during the 2024–25 tax year must maintain digital records and submit summary information to HMRC every quarter via recognised software.
These quarterly submissions are intended to make tax administration more efficient and reduce errors. HMRC has clarified that the quarterly updates are not additional tax returns but summaries of income and expenses.
Who needs to comply and when
The phased introduction of MTD initially targets sole traders and landlords with incomes over £50,000, followed by those earning above £30,000 from April 2027, and subsequently those earning above £20,000 from April 2028.
Each phase is determined by income thresholds and the specific tax year the threshold is met. HMRC provides a detailed schedule of the required quarterly update dates and their corresponding deadlines for each group.
Support and resources available
To help taxpayers prepare for the transition, HMRC offers a range of resources, including online guidance, instructional webinars, and videos. Those who are unable to use digital tools for reasons such as disability or remote location can apply for an exemption.
Free and commercial software options are available, designed to simplify record-keeping and reporting tasks. The system automatically generates quarterly summaries, streamlining the process.
Managing records and quarterly submissions
Once digital records are maintained, the software supports quarterly updates to HMRC. Although these summaries are required throughout the tax year, the standard Self Assessment tax return remains due on 31 January following the end of the tax year.
Having income and expense details digitised eliminates the need for last-minute record searches each January. According to HMRC’s Director of Making Tax Digital, Craig Ogilvie, “A range of software is available and the system is straightforward and helps reduce errors. Thousands of volunteers have already used it successfully.”
Penalties and compliance incentives
For customers joining MTD in April 2026, a 12-month period will apply in which penalty points for late quarterly updates are not issued. Thereafter, a system of penalty points will be in effect, with a £200 fine imposed once four points are accrued.
This approach allows some flexibility for occasional late submissions but is designed to encourage regular compliance. HMRC indicates the new rules are intended to make it easier for taxpayers to manage their affairs and pay the correct amount of tax.
Final Summary
The introduction of Making Tax Digital for sole traders and landlords earning over £50,000 represents a significant shift in the UK’s tax administration framework. As the government phases in the new requirements, affected individuals are being urged to familiarise themselves with the necessary software and begin preparing for regular, digital record-keeping and reporting.
A transition period without penalties offers time to adjust, but compliance will be strictly monitored as the programme expands. For those wishing to track regulatory changes and tax software options, exploring digital tools such as the Pie app may offer additional information on upcoming requirements.
