Millions of UK taxpayers, including self-employed individuals and landlords, are facing significant changes to income tax filing. Beginning in April, HM Revenue & Customs (HMRC) will require many individuals to submit digital updates of their earnings five times a year rather than the current annual process.
This change, part of the government’s “Making Tax Digital for Income Tax Self Assessment” (MTD ITSA) programme, aims to increase efficiency, accuracy, and compliance.
However, tax specialists have raised concerns that most affected taxpayers remain unaware of the new rules, which could lead to widespread confusion and financial penalties for those unprepared.
Overview of the new rules
Making Tax Digital is regarded by the UK government as the most substantial reform to personal taxation since self-assessment was introduced in 1997.
Under the new rules, individuals with qualifying incomes will be required to maintain digital records of self-employment or property income and expenses using approved software. From April 2026, eligible taxpayers will need to update HMRC at least quarterly with summaries of their income and expenses.
These records must be submitted through third-party software compatible with Making Tax Digital. While the stated goal is to reduce errors and administrative burdens in the long run, some business owners and advisers have warned that the immediate impact will be an increase in administrative work and potential costs for small businesses.
Who will be impacted by the changes
According to the latest HMRC guidance, from 6 April 2026, individuals with trading or property income exceeding £50,000 will be required to comply with the new MTD ITSA rules. The scope will widen in April 2027 to capture those earning over £30,000, and from April 2028, individuals with qualifying income over £20,000 will also be included.
HMRC has stated that these thresholds are based on gross income, not net profits, so even those with modest take-home pay could be affected.
The measures apply to sole traders, private landlords, and many self-employed professionals, including consultants, personal trainers, and hairdressers. Partnerships and limited companies are currently excluded, with HMRC planning to issue a separate timeline for partnerships’ compliance in future.
Determining your income band
Eligibility for Making Tax Digital depends on gross income in the preceding tax year. HMRC defines qualifying income as the total turnover from self-employed work or rental property before expenses are deducted.
For 2026, those whose total trading or property income exceeded £50,000 in the 2024/25 tax year must begin digital reporting from April 2026. Individuals below the threshold should monitor their income for subsequent years.
For instance, those earning above £30,000 by 2025/26 will need to comply from April 2027. The government has indicated its intention to further reduce thresholds with legislation in the future, potentially capturing all self-employed taxpayers and landlords regardless of income.
Exemptions and excluded incomes
The new requirements apply exclusively to self-employment and property income. Income from savings, dividends, or pensions will be excluded. Individuals who rely solely on these types of income do not need to file digital updates under the MTD ITSA regulations.
HMRC has also established provisions for digital exclusion. Individuals can apply for an exemption if it is not reasonable for them to comply, which could be due to age, disability, lack of access to technology, or religious objections to digital record-keeping.
Reporting schedules and filing process
Taxpayers captured by the new rules must submit updates every quarter, typically in early August, November, February, and May, summarising income and expenses for the preceding three months.
These updates replace parts of the previous annual return but do not trigger immediate tax payments. A final “end of period” statement and a comprehensive tax return will still be required by the traditional 31 January deadline following the end of the tax year.
HMRC states that after each quarterly submission, taxpayers will be able to view an updated estimate of their potential tax bill, aiding financial planning throughout the year.
Final Summary
The Making Tax Digital for Income Tax Self Assessment regime marks a major change to how millions of taxpayers in the UK manage their obligations to HMRC. The new system, gradually rolling out over the coming years, will mandate digital record-keeping and quarterly reporting for a significant number of the self-employed and private landlords.
While the government expects the long-term benefits to include greater tax accuracy and some administrative simplification, there are short-term concerns about increased costs, the learning curve for digital compliance, and the risk of penalties for non-compliance.
With the penalty regime and thresholds set to tighten further towards the end of the decade, it is crucial for affected individuals to act now to review their income band, obtain compliant software, and establish robust digital record-keeping systems.
Staying on top of these tax developments can be demanding, but tools like the Pie app are available to help users organise their financial records and deadlines with greater ease.
