HM Revenue and Customs (HMRC) has announced the next stage of its campaign to inform millions of taxpayers about a fundamental change to how they report their income. The Making Tax Digital (MTD) initiative is set to expand significantly from April 2026, requiring a shift to digital record-keeping and quarterly submissions.
Who Needs to Join Making Tax Digital and When?
The rollout will happen in stages, based on income thresholds. From April 2026, any sole trader or landlord with a gross income of £50,000 or more in the 2024/2025 tax year must begin using the system.
The income threshold will then be lowered. Starting in April 2027, the scheme will include those with an income of £30,000 and above for the current tax year at that time. The Government has further plans to extend MTD to individuals earning £20,000 or more from the 2026/2027 tax year onwards.
Once fully implemented, approximately three million people will be mandated to use the programme.
What Making Tax Digital Requires from You
Eligible taxpayers will have new obligations. They must:
- Maintain digital records of their income and expenses using software compatible with Making Tax Digital.
- Send quarterly reports to HMRC summarising their business income and expenses.
- Finally, submit a formal annual tax return and pay any tax due by the deadline of January 31 of the following year.
HMRC is actively communicating these changes. The tax office states it provides extensive online guidance and is using direct letters, live events, webinars, and social media to raise awareness. A new marketing push is planned shortly after the January 31 tax deadline.
New Penalty Rules and How to Prepare
Alongside the MTD rollout, HMRC is introducing reformed penalty rules for late submissions and payments. Under the new system, customers will accrue points for missing deadlines, with penalties designed to be more proportionate to the length of delay and amount owed than the current regime.
Taxpayers are strongly advised to register early to ensure a smooth transition. It is already possible to sign up and begin using the system voluntarily for the 2025/2026 tax year, allowing for familiarisation before the mandatory start date.
HMRC has also engaged with the accountancy profession through its Agent Outreach scheme, reporting that over 99% of small and medium-sized practices are now aware of the impending changes.
