HMRC confirms new income tax rule change starting from next year

With less than a year to go, sole traders and landlords earning over £50,000 will need to adopt the Making Tax Digital (MTD) for Income Tax system by April 6, 2026. This significant shift towards digital record-keeping and income reporting to is set to save these people some considerable time.

By maintaining digital records throughout the year, sole traders and landlords can save precious hours previously spent collating information at tax return time. This allows them to focus more on their business activities, driving as part of the

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HMRC estimates that around 780,000 self-employed individuals and landlords will be required to use MTD for Income Tax from April 2026, with an additional 970,000 joining from April 2027.

The introduction of quarterly updates will distribute the workload more evenly throughout the year, bring the tax system closer to real-time reporting, and help businesses stay on top of their finances and avoid the last-minute rush.

HMRC is encouraging eligible customers to sign up to a testing programme on GOV.UK and start preparing now. Agents can also register their clients via GOV.UK., reports .

James Murray MP, Exchequer Secretary to the Treasury, has thrown his weight behind the new 'MTD for Income Tax', declaring it a key element in the government's strategy to revamp the UK's tax system to bolster economic growth.

"MTD for Income Tax is an essential part of our plan to transform the UK's tax system into one that supports economic growth," he said. "By modernising how people manage their tax, we're helping businesses work more efficiently and productively while ensuring everyone pays their fair share."

He further emphasised the importance of this initiative as part of the government's broader vision: "This is a crucial step in this government's decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth."

Craig Ogilvie, HMRC's director of making tax digital, also chimed in with high praise for the scheme, calling it a game-changer since the inception of Self Assessment in 1997.

"MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997," he said. "It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax."

Mr Ogilvie encouraged early adoption by joining the testing programme: "By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year."

Come April 2026, individuals with income over £50,000 will be required to keep digital records, utilise MTD-compatible software, and submit quarterly summaries of their income and expenses to HMRC.

The shift to digital is expected to streamline business operations, minimise tax calculation errors, and offer a more transparent view of tax responsibilities throughout the fiscal year.

Qualifying income includes gross income from self-employment and property before any tax allowances or expenses are deducted. Those with qualifying income above £30,000 will also be required to use MTD for Income Tax from April 2027. The threshold will then decrease to £20,000 from April 2028.

The phased introduction of MTD for Income Tax follows the successful implementation of MTD for VAT, which now assists over two million businesses in reducing errors and saving time on their tax affairs.

Businesses that participated in the MTD for VAT testing phase were better prepared for the transition to quarterly reporting.

An independent report published in 2021 discovered that 69 per cent of mandated businesses experienced at least one benefit from MTD for VAT, while 67 per cent reported that it reduced the potential for mistakes in their record keeping.