From April 2026, a major change is coming to the way many self-employed individuals and landlords in the UK manage and report their income to HMRC. The government’s Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) initiative is set to reshape how people track earnings, file returns, and comply with tax rules. If you’re a sole trader or landlord earning above a certain threshold, this change could significantly impact how you manage your finances.
Who Will Be Affected?
The rollout of MTD for Income Tax will begin in April 2026 and apply to:
- Self-employed individuals and landlords with a total annual income over £50,000 (from self-employment and/or property).
- Those earning between £30,000 and £50,000 will be brought into the system a year later, in April 2027.
- A further rollout is expected for people with income above £20,000 in the years that follow.
This means that if your total gross income from self-employment or property rental is above £50,000 by the 2024/25 tax year, you will need to prepare for the new digital system by April 2026.
What Will Change?
Under MTD for Income Tax, individuals will need to:
- Keep digital records of income and expenses using MTD-compatible software.
- Submit quarterly updates to HMRC summarising income and costs.
- File a final declaration at the end of the tax year, replacing the current Self Assessment return.
Rather than submitting a single return once a year, you’ll now be reporting to HMRC at least five times annually—four quarterly updates and one year-end summary.
Why Is This Happening?
The government aims to modernise the tax system, reduce errors, and make it easier for individuals to stay on top of their tax obligations. By encouraging regular reporting and digital record-keeping, MTD is designed to minimise last-minute scrambling and increase the accuracy of tax returns.
It also gives individuals more real-time insight into their tax position, potentially helping with cash flow and financial planning throughout the year.
Costs and Practical Impact
For many individuals, there will be some initial costs involved in transitioning to MTD. This may include:
- Purchasing or subscribing to accounting software.
- Learning to use new digital tools or systems.
- Potentially hiring an accountant or bookkeeper for help with quarterly reporting.
While the long-term goal is to simplify tax compliance, the short-term reality may involve additional time, effort, and expense—especially for those not used to digital tools.
That said, for people already using software like QuickBooks, Xero, or FreeAgent, the switch may be relatively straightforward. Some may be able to use spreadsheets with bridging software to remain compliant, although this is typically more complex.
Are There Any Exemptions?
Yes. HMRC recognises that not everyone is able to use digital systems. You may be able to apply for an exemption if:
- You have a disability or health condition that prevents you from using digital tools.
- You live in an area with poor internet access.
- Your age or personal circumstances make digital reporting unreasonably difficult.
- You have religious objections to using computers or the internet.
If you believe you qualify for an exemption, you must apply to HMRC and wait for confirmation before assuming you’re excluded from the new rules.
Common Concerns
Many self-employed individuals are worried about the additional workload. Quarterly updates mean more frequent deadlines and a consistent level of admin throughout the year. Some may also be concerned about the cost of software or professional support.
Another concern is digital readiness. A large percentage of people who will be affected are still using paper records or non-compliant software. Transitioning to digital systems will require time and support—something that may catch people off guard if they don’t begin preparing early.
How to Prepare
Here are a few steps individuals can take now to get ready for MTD for Income Tax:
- Check your income from self-employment and property for the current and previous tax years to see when you’ll be affected.
- Explore MTD-compliant software options early. Many platforms offer free trials or starter packages.
- Digitise your record-keeping now to get used to managing accounts throughout the year.
- Speak to your accountant or a tax adviser if you use one, and plan how you’ll handle the increased reporting frequency.
Final Thoughts
Making Tax Digital for Income Tax is a significant shift in how self-employed individuals and landlords manage their finances. While the move toward a digital, real-time tax system offers long-term benefits—such as fewer errors, more accurate reporting, and better financial awareness—it will take some adjustment, particularly in the early stages.
By taking action now, individuals can reduce the stress of the transition and position themselves for a smoother, more manageable tax experience from April 2026 onward.