The way you manage and report your income in the UK is about to undergo a massive transformation. HMRC is expanding its Making Tax Digital (MTD) initiative to include income tax. This marks a major shift from the traditional annual tax return to a fully digital, real-time system.
Starting in April 2026, many sole traders and landlords must adapt to these new rules. If you run a business or earn income from property, understanding these changes is vital. Here is a quick summary of what Making Tax Digital means for you and how you can prepare.
What is Making Tax Digital for income tax?
MTD for income tax requires self-employed individuals and landlords to use compatible software for their financial records. If you currently use paper records or basic spreadsheets, these will no longer meet HMRC standards. You must upgrade to a digital system.
The core of this change involves moving away from a single annual tax return. Instead, the new system introduces three mandatory steps:
- Digital record-keeping: you must record all business and property income and expenses digitally using MTD-compatible software.
- Quarterly updates: you must send a summary of your income and expenses to HMRC every three months directly from your software.
- Final declaration: after the tax year ends, you will review your position, make any accounting adjustments, and submit a final declaration to confirm your tax liability.
The phased rollout explained
HMRC is introducing these rules in stages. The date you must start following the new rules depends on your total gross income from self-employment and property combined.
- From April 2026: individuals with a total qualifying income over £50,000 must join the MTD scheme.
- From April 2027: the threshold drops to include anyone earning over £30,000.
- From April 2028: the government plans to lower the threshold further to include those earning over £10,000, subject to review.
Why early preparation is crucial
Transitioning to a fully digital tax system takes time and planning. You need to assess your income now to see when the rules will officially apply to your business.
Leaving your preparation until the last minute is a dangerous game. HMRC is introducing a new points-based penalty system for missed deadlines. You will receive a point for each missed quarterly update, which quickly leads to strict financial fines.
Get expert help from RHJ Accountants
Navigating these new digital reporting requirements can feel overwhelming. Figuring out which software to use and how to submit quarterly updates adds a lot of admin to your plate. However, you do not have to manage this transition alone.
For a complete, in-depth guide on these upcoming changes, read the full Making Tax Digital article on the RHJ Accountants website.
