Self Employed Face Multiple Yearly HMRC Filings Under Reforms

Millions of self-employed individuals and landlords across the United Kingdom are preparing for significant changes in how they report their income to HM Revenue & Customs (HMRC) as part of the government’s Making Tax Digital (MTD) initiative. Effective from April, these reforms will introduce stricter digital reporting rules.

Taxpayers affected by the changes could be required to submit financial updates as many as 13 times per year or otherwise risk financial penalties.

The initiative aims to improve tax accuracy and compliance but is drawing concern about potential administrative burdens on small business owners and sole traders.

Overview of Making Tax Digital

Making Tax Digital is a government-led reform intended to modernise the UK’s tax system by shifting the reporting process from paper-based to digital records and submissions.

The first stage targets the self-employed and landlords with annual business or property income over £50,000, requiring them to use approved software solutions for HMRC submissions.

The reforms will eventually extend to those with lower thresholds, with the aim of improving accuracy and providing a more up-to-date view of taxpayer finances.

Filing requirements for taxpayers

Under the new regulations, most affected taxpayers will now need to submit a minimum of five updates to HMRC each year four quarterly submissions and a final annual declaration.

For individuals with multiple business activities, such as those who are both self-employed and landlords, filing obligations may rise substantially.

In some cases, the total number of digital submissions required could reach up to 13 annually if the taxpayer is managing several enterprises and is also VAT-registered.

Financial and administrative impact

The updated filing requirements mean that millions of taxpayers must shift from traditional accounting methods to digital software platforms. According to industry sources, approximately one-third of sole traders still rely on pen-and-paper accounting.

The cost of commercial tax software, which is necessary for compliance, is expected to average around £320 for initial purchase and £110 per year for subsequent licensing.

Some small business representatives have expressed concern that these costs, combined with increased reporting, will have a disproportionate impact on sole traders and microbusinesses, diverting time and resources from daily operations.

Penalties for non-compliance

Failure to meet reporting deadlines will result in financial penalties under a newly introduced points-based system. Taxpayers will accrue one penalty point for each missed deadline, receiving a £200 fine after reaching four points within two years.

This approach is designed to be more proportionate and to encourage consistent compliance, while offering flexibility for occasional late submissions.

Timeline for phased implementation

The wider rollout of Making Tax Digital will occur in phases. From April, self-employed individuals and landlords with annual business or property income above £50,000 must comply with the new rules.

In April 2027, those with income of £30,000 or more will be brought into the regime, and by April 2028 the scope will widen further to include individuals with income exceeding £20,000.

Official estimates indicate that by full implementation, approximately 2.9 million taxpayers will be required to submit at least five tax filings each year under the new system.