HMRC Dispatches 200,000 Letters On Digital Tax Reforms

Introduction

HM Revenue and Customs (HMRC) has issued more than 200,000 letters to taxpayers who will be directly affected by the forthcoming introduction of Making Tax Digital (MTD) for Income Tax.

The initiative, which comes into effect from 6 April 2026, targets sole traders and landlords with qualifying incomes above £50,000. The correspondence aims to provide notice of the need to maintain digital accounting records and submit earnings via approved software, as the government seeks to modernise and streamline the UK tax system.

With several months to prepare, HMRC is urging those affected to consider early participation in pilot programmes to ensure a smooth transition.

Overview of the Making Tax Digital changes

Making Tax Digital for Income Tax is set to transform the way self-employed individuals and landlords report their business income to HMRC. From April 2026, those with annual business or property income over £50,000 will need to keep digital records and provide quarterly updates through compatible software. This reform is intended to improve accuracy, reduce errors, and deliver a more efficient process for both taxpayers and HMRC.

According to official guidance, the phased approach will begin with the highest earners, followed by individuals with income above £30,000 in April 2027. The move forms part of a wider government drive towards digital administration of personal and business tax affairs.

Details of HMRC’s correspondence campaign

To ensure clear communication ahead of these significant changes, HMRC has dispatched over 200,000 letters alerting taxpayers of upcoming requirements.

The correspondence outlines the mandatory switch to digital record-keeping and quarterly reporting, and highlights the availability of pilot schemes prior to full implementation. HMRC described the pilot as a “chance to get comfortable with the new system before it becomes mandatory” and an opportunity to access dedicated support during the transition.

Recipients are also provided with guidance on sourcing appropriate software and preparing for compliance.

Scope and timeline for affected taxpayers

Official assessments from HMRC estimate that roughly 780,000 self-employed individuals and landlords in the UK will be impacted by the first phase of Making Tax Digital for Income Tax Self Assessment, beginning in April 2026.

An additional 970,000 taxpayers are expected to join in April 2027, once the threshold is lowered to £30,000.

Taxpayers already using digital tools or spreadsheets will need to ensure their systems are compatible with HMRC’s requirements. Registration for the government’s pilot scheme is currently available online, providing participants with early experience of the new procedures.

HMRC guidance on software and preparation

HMRC has reassured those affected that quarterly updates will be generated automatically by approved software, reducing the burden of manual reporting.

The department emphasises that individuals will not need to submit additional tax returns, but instead will provide periodic summaries of income and expenses. According to HMRC, “There is not a one-size-fits-all solution the key is finding software that fits your business needs.” To aid transition, a range of free and paid software options have been made available, and those using existing accounting tools can often find compatible solutions.

The aim is to provide ongoing, real-time estimates of tax liabilities, thereby supporting cash flow management throughout the year.

Reactions and feedback from pilot participants

Preliminary feedback from participants in the Making Tax Digital pilot has been described as “encouragingly positive” by HMRC. Over 2,000 quarterly updates have already been submitted through the programme, demonstrating practical viability. Making Tax Digital Director Craig Ogilvie stated, “Tax is changing and, with just months before the reforms begin, now is the time to start preparing.

Early experience shows the new system is straightforward after initial familiarisation.” HMRC maintains that the new approach will help taxpayers avoid the last-minute stress commonly associated with the January self-assessment deadline.