HM Revenue and Customs (HMRC) has issued a critical 'act now' alert, warning more than 860,000 sole traders and landlords across the UK to prepare for significant tax rule changes set to take effect from April 2026. The new Making Tax Digital (MTD) for Income Tax initiative mandates digital record-keeping and quarterly updates for those with qualifying income over £50,000, marking a major shift in how self-employed individuals and property owners manage their tax affairs.
Understanding the New Digital Tax Requirements
Starting on April 6, 2026, sole traders and landlords with self-employment or property income exceeding £50,000 will be required to use compatible software to maintain digital records and submit light-touch quarterly updates of their income and expenses to HMRC. These updates are not full tax returns but are designed to spread tax administration throughout the year, reducing the last-minute scramble often associated with the annual Self Assessment deadline.
Key Deadlines and Support Available
HMRC is offering a range of free support resources, including detailed online guidance and webinars, to help affected individuals transition smoothly to the new system. Exemptions are available for those genuinely unable to use digital tools, with further details accessible on GOV.UK. The government has confirmed that customers joining MTD in April 2026 will not face penalty points for late quarterly updates during the first 12 months, providing a grace period for adaptation.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, emphasised the urgency of preparation, stating: "With two months to go until MTD for Income Tax launches, now is the time to act. A range of software is available, and the system is straightforward and helps reduce errors. Thousands of volunteers have already used it successfully."
Penalty System and Transition Support
The new system introduces a penalty points framework for late submissions, with a £200 fine applied only after four points are accrued. This approach ensures that minor errors or delays will not result in immediate financial penalties, offering some leniency as users adjust to the quarterly reporting cycle. Available software, including free options, is designed to generate simple summaries for HMRC after income and expenses are recorded, streamlining the process.
Phased Implementation and Future Deadlines
MTD for Income Tax will be rolled out in phases for sole traders and landlords. For those joining in April 2026, the tax return for the 2025 to 2026 tax year (pre-MTD) remains due by January 31, 2027. The first MTD tax return, covering the 2026 to 2027 tax year, will be due by January 31, 2028. HMRC advises all in-scope individuals to prepare immediately by reading the guidance, selecting appropriate software, and signing up on GOV.UK, or consulting with their tax agent.
This initiative forms part of the Government’s broader plan to modernise the UK’s tax system, aiming to support economic growth by reducing errors and ensuring fair tax compliance. Thousands of sole traders and landlords have already voluntarily participated in testing programs, successfully submitting over 12,000 quarterly updates, demonstrating the system's viability and ease of use.
