The government’s Making Tax Digital (MTD) programme continues to reshape the way individuals report their taxes. From 6th April 2026, the next phase will begin with the introduction of Making Tax Digital for Income Tax Self-Assessment, bringing significant changes for self-employed individuals and landlords across the UK.
The reform is part of the government’s long-term plan to modernise the tax system, reduce errors in tax reporting and encourage digital record-keeping. However, it also introduces new compliance requirements that businesses and property owners should prepare for.
What is Making Tax Digital for Income Tax?
MTD is an initiative by HMRC to move the UK tax system toward fully digital reporting. It has been mandatory for VAT since 2022 and is now being expanded to individuals who submit self-assessment returns.
Who will be affected?
From 6th April 2026, MTD for Income Tax will apply to sole traders and rental landlords with combined gross income (turnover) from self-employment and property exceeding £50,000 per year.
The qualifying income threshold will gradually decrease in later years with a reduction to £30,000 from April 2027 and £20,000 from April 2028.
What will change?
The key changes under the system are:
1. Digital record keeping
Taxpayers must maintain digital records of business and property income and expenses using MTD-compatible software. Manual spreadsheets or paper records alone will no longer be sufficient unless linked to approved software.
2. Quarterly updates
Taxpayers will be required to send four quarterly updates to HMRC summarising income and expenses throughout the year.
3. End-of-year final declaration
At the end of the tax year, taxpayers will still need to submit a final declaration confirming their overall income and making any necessary adjustments.
New penalty system
Alongside MTD for Income Tax, the government is introducing a points-based penalty system for late submissions.
Under this system:
- Each late filing results in a penalty point
- Once a threshold is reached, a £200 fine is issued
- Additional penalties may apply for continued non-compliance.
There will be some transitional easements in the early stages, but taxpayers should still aim to comply from the outset.
Are there any exemptions?
Not everyone will fall within the new rules immediately. The following groups are exempt or excluded, including:
- Individuals without access to digital services due to age, disability or location
- Some trusts and partnerships
Preparing for the changes
With the start date approaching, affected individuals should begin preparing now. Practical steps include:
- Reviewing whether their income exceeds the threshold
- Switching to MTD-compatible accounting software
- Ensuring digital record-keeping systems are in place
- Speaking with an accountant or tax adviser about compliance
