From April 2026, significant changes are coming to the way self-employed individuals and landlords in the UK report their income to HMRC. The government’s Making Tax Digital (MTD) initiative aims to modernise the tax system, making it more efficient and easier for taxpayers to get their tax right.

Who Will Be Affected?

The MTD for Income Tax Self-Assessment (ITSA) will be introduced in phases:

• – From April 2026: Self-employed individuals and landlords with annual income over £50,000 will be required to comply.

• – From April 2027: The threshold lowers to £30,000.

These thresholds are based on the total gross income from self-employment and property, as reported on your 2024/25 personal tax return to 5^th April 2025.

Key Changes Under MTD:

1. 1. Digital Record Keeping

Taxpayers will need to maintain digital records of their income and expenses using HMRC approved software. This move aims to reduce errors and streamline the tax reporting process.

2. Quarterly Updates
Instead of a single annual tax return, affected individuals will submit quarterly updates summarising their income and expenses. These updates will be cumulative, allowing for corrections in subsequent submissions.

3. Final Declaration
At the end of the tax year, a final declaration will be submitted, confirming the total income and any other taxable income not included in the quarterly updates. This replaces the traditional Self Assessment tax return.

Penalties for Non-Compliance:

HMRC is introducing a points-based penalty system for late submissions and payments:

• – Late Submissions: Points accrue for each missed deadline. Accumulating a certain number of points will trigger a £200 penalty.

• – Late Payments: Penalties start at 2% of the unpaid tax, increasing over time.

These measures aim to encourage timely and accurate tax reporting.

Preparing for MTD:

To ensure a smooth transition:

• – Assess Your Income: Determine if your income exceeds the thresholds for MTD compliance.
• – Choose Compatible Software: Select HMRC-approved software that suits your business needs.
• – Maintain Digital Records: Start keeping digital records of your income and expenses ahead of the mandatory dates.
• – Seek Professional Advice: Consult with a tax advisor or accountant to understand how MTD affects your specific circumstances.

Conclusion:

The introduction of Making Tax Digital marks a significant shift in how self-employed individuals and landlords manage their tax affairs. By embracing digital record-keeping and timely reporting, taxpayers can benefit from a more streamlined and accurate tax process.

It’s important to note that while the frequency in reporting will change, the actual payment deadlines currently will not. Tax will still be due by 31 January following the end of each tax year, with payments on account (where applicable) remaining payable by 31 January and 31 July.

Early preparation and understanding of the new requirements will be key to ensuring compliance and avoiding penalties.

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