HM Revenue and Customs (HMRC) has issued a significant warning to self-employed individuals and landlords whose annual turnover surpasses £50,000, as a major overhaul of the tax system approaches. The rollout of the Making Tax Digital (MTD) platform, described by HMRC as the "biggest change to Income Tax in over 30 years," will become compulsory for certain taxpayers starting this spring.
Compulsory Digital Transition for High Earners
From April 6, 2026, anyone with a turnover from property and self-employment exceeding £50,000 must adopt the new digital system. This mandate requires taxpayers to maintain digital records and submit quarterly updates using recognised software, marking a decisive shift away from traditional paper-based methods.
Phased Implementation and Lower Thresholds
The transition to Making Tax Digital will be implemented in phases to accommodate different income levels. Following the initial phase for those earning over £50,000, the requirements will expand to include individuals with turnovers above £30,000 by April 6, 2027. Subsequently, by April 6, 2028, the system will encompass anyone with an annual turnover exceeding £20,000.
How the New System Operates
Under the MTD framework, taxpayers will send quarterly updates that provide simple summaries of their business performance, directly pulled from their digital records. A key benefit of this approach is that after each update, users will receive an estimate of their tax bill, enabling better financial planning and budgeting throughout the year.
Software Options and Professional Support
HMRC has clarified that there is no single designated software or application for Making Tax Digital. Instead, the initiative has partnered with multiple software providers that facilitate the digitalisation and formation of records. Additionally, accountants, agents, and bookkeepers can manage MTD for Income Tax on behalf of their clients, provided they have the necessary permissions.
This comprehensive digital transformation represents a fundamental change in how self-employed individuals and landlords interact with the tax system, emphasising efficiency, accuracy, and forward planning in tax management.
