HM Revenue and Customs (HMRC) has issued a critical two-month warning to approximately 860,000 sole traders and landlords across the United Kingdom, urging them to prepare for the mandatory adoption of digital tax reporting starting from 6 April 2026. This significant rollout is a key component of the Labour Party government's broader strategy to modernise the UK's tax infrastructure, aiming to streamline processes and foster economic growth by reducing administrative burdens and errors.
Who Needs to Act and What Are the Requirements?
Sole traders and landlords with annual earnings exceeding £50,000 from self-employment or property income are specifically targeted by this initiative. They must now take immediate action to comply with the Making Tax Digital (MTD) for Income Tax scheme, which requires the use of approved software to maintain digital records and submit quarterly updates to HMRC. These updates, which cover income and expenses, are designed to be light-touch and are not additional tax returns, but rather a shift towards more frequent, manageable reporting.
Key Deadlines and Transitional Support
From 6 April 2026, eligible individuals will need to begin using recognised software for their tax affairs. To ease the transition, the government has announced that those joining MTD in April 2026 will not face penalty points for late quarterly updates during the first 12 months. This grace period is intended to help users adapt to the new system without immediate financial repercussions.
Craig Ogilvie, HMRC's Director of Making Tax Digital, emphasised the urgency, 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." He added that this change will simplify tax management for sole traders and landlords, ensuring accurate tax payments and eliminating the last-minute rush associated with annual tax returns.
Progress and Future Filing Schedules
Already, thousands of sole traders and landlords have proactively signed up for MTD for Income Tax, with over 12,000 quarterly updates successfully submitted through a voluntary testing programme. For those affected, the tax return for the 2025 to 2026 tax year will still be filed by 31 January 2027 in the traditional manner, as it pertains to the period before MTD implementation. The first MTD tax return, covering the 2026 to 2027 tax year, will then be due by 31 January 2028, marking a full transition to the digital system.
This move is part of a larger effort to spread tax administration throughout the year, making it easier for individuals to stay on top of their finances and contribute to a more efficient tax ecosystem. HMRC encourages all eligible parties to visit GOV.UK to start their preparations immediately, leveraging available resources and software options to ensure a smooth adaptation to the new requirements.
