HMRC change to hit self-employed and landlords next year | Personal Finance | Finance

In less than a year, sole traders and landlords earning over £50,000 will be mandated to utilise Making Tax Digital (MTD) for Income Tax from April 6, 2026. This significant move towards digital record-keeping and income reporting to HM Revenue and Customs (HMRC) is expected to save these individuals valuable time.

By keeping digital records throughout the year, sole traders and landlords can save hours previously spent gathering information at tax return time. This enables them to concentrate more on their business activities, thereby fuelling economic growth as part of our Plan for Change.

According to HMRC, approximately 780,000 self-employed individuals and landlords will need to adopt MTD for Income Tax from April 2026, with an additional 970,000 joining from April 2027, reports the Daily Record.

The implementation of quarterly updates will spread the workload more evenly throughout the year, bring the tax system closer to real-time reporting, and aid businesses in managing their finances and avoiding the last-minute rush.

HMRC is urging eligible customers to sign up for a testing programme on GOV.UK and start preparing now. Agents can also register their clients via GOV.UK.

James Murray MP, Exchequer Secretary to the Treasury, has voiced his support for the Making Tax Digital (MTD) initiative for Income Tax, labelling it as a crucial component of the government’s strategy to improve the UK’s tax system and boost economic growth.

He expressed with conviction: “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.”

Elaborating on the crucial role of the new system, he declared: “This is a crucial step in this government’s decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth.”

Craig Ogilvie, HMRC’s Director of Making Tax Digital, weighed in on the sweeping reforms: “MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997. It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.”

Ogilvie also encouraged proactive engagement: “By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year.”

Starting from April 2026, individuals earning over £50,000 from self-employment or property will need to follow the new Making Tax Digital requirements, keeping records digitally, using compatible software, and submitting their income and expenses every quarter to HMRC.

The shift towards digital record-keeping is set to enhance business operations, reduce tax reporting errors, and provide a clearer understanding of tax obligations throughout the financial year.

Qualifying income encompasses gross earnings from self-employment and property prior to the deduction of any tax allowances or expenses. Those with qualifying income exceeding £30,000 will also be obliged to adopt MTD for Income Tax starting from April 2027.

This threshold will subsequently drop to £20,000 from April 2028.

The gradual roll-out of MTD for Income Tax comes after the successful launch of MTD for VAT, which currently aids over two million businesses in minimising errors and saving time on their tax matters. Businesses that participated in the MTD for VAT trial phase were better equipped for the transition to quarterly reporting.

A 2021 independent report revealed that 69 per cent of mandated businesses reaped at least one benefit from MTD for VAT, while 67 per cent reported it reduced the likelihood of errors in their record-keeping.