HM Revenue and Customs (HMRC) has confirmed a significant shift in tax reporting that will affect hundreds of thousands of taxpayers. From 6 April 2026, all sole traders and landlords with annual income over £50,000 will be required to use Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA).
This mandatory move to digital record-keeping and reporting is designed to streamline processes and reduce errors, while allowing individuals to save time and better manage their finances.
A Step Towards Smarter Tax Management
According to the Government, the aim is to help individuals focus more on running their businesses rather than managing paper-based admin, a key part of its broader ‘Plan for Change’ to support economic growth.
HMRC estimates that approximately 780,000 self-employed individuals and landlords will be required to use MTD for Income Tax from April 2026, with a further 970,000 joining the system in April 2027.
The introduction of quarterly updates is expected to distribute the administrative workload more evenly throughout the year. By encouraging real-time financial tracking, HMRC hopes the new system will prevent last-minute tax submissions and offer a clearer overview of tax obligations.
Act Now: Early Testing Encouraged
HMRC is actively encouraging eligible taxpayers to begin preparations now by enrolling in the MTD for ITSA testing programme, available via GOV.UK. Agents are also able to register clients on their behalf.
James Murray MP, Exchequer Secretary to the Treasury, commented:
“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 operate more efficiently and productively, while making sure everyone pays their fair share.
This is a crucial step in the government’s ‘Decade of National Renewal’ and part of our Plan for Change, as we remove obstacles that hinder growth.”
What Will Be Required Under MTD for ITSA?
From April 2026, those earning over £50,000 from qualifying income sources will need to:
- Keep records digitally using MTD-compatible software
- Submit quarterly updates to HMRC
- Finalise their annual tax return using the new digital process
This applies to gross income from self-employment and/or property rental, before deductions for allowances or expenses.
The rollout will continue in stages:
- From April 2027, individuals earning over £30,000 will be included
- From April 2028, the threshold drops further to £20,000
Following in the Footsteps of MTD for VAT
The phased rollout follows the success of Making Tax Digital for VAT, now used by over two million businesses. HMRC says MTD for VAT has already helped reduce record-keeping errors and save time for many business owners.
Those who participated in the VAT pilot were significantly more prepared for the transition to quarterly digital reporting. An independent 2021 study revealed:
- 69% of participating businesses experienced at least one key benefit
- 67% reported fewer errors in record-keeping
Why This Change Matters
Craig Ogilvie, HMRC’s Director of Making Tax Digital, said:
“MTD for Income Tax represents the biggest change to the Self Assessment regime since its launch in 1997.
It will simplify tax administration for self-employed individuals and landlords, helping them stay on top of their obligations and pay the correct amount of tax.
By joining the MTD testing programme now, taxpayers can become familiar with the new system and receive tailored support from our MTD customer service team, well before it becomes mandatory.”
What You Should Do Next
If you’re a self-employed individual or landlord earning over £50,000, now is the time to:
- Review your record-keeping process
- Choose MTD-compatible software
- Sign up for HMRC’s testing programme via GOV.UK
- Speak to your accountant or agent for tailored support
Final Thoughts
The move to Making Tax Digital for Income Tax is one of the most significant changes to the UK tax system in decades, and preparation is key. By taking steps now, choosing the right software, reviewing your record-keeping, and exploring HMRC’s testing programme, you’ll avoid last-minute stress and ensure a smooth transition when the rules become mandatory. At Accounting People, we’re here to guide sole traders, landlords, and businesses through every stage of MTD, helping you stay compliant while focusing on what matters most: growing your business.
