Act now – big changes are coming.
From 6 April 2026, Making Tax Digital (MTD) for Income Tax will become mandatory for more than 864,000 sole traders and landlords across the UK. If your income from self-employment and/or property exceeds £50,000, the way you report tax to HMRC is about to change.
This major reform, introduced by HM Revenue & Customs (HMRC), is part of the Government’s plan to modernise the UK tax system, reduce errors, and help taxpayers manage their tax throughout the year rather than rushing in January.
If you fall within the scope, there is limited time left to prepare — and early action will save stress, time, and potential penalties later.
Who Needs to Act Now?
You will be required to join MTD for Income Tax from 6 April 2026 if:
- You are a sole trader and/or landlord, and
- Your combined income from self-employment and property exceeded £50,000 in the 2024/25 tax year
If this applies to you, preparation should start now to ensure a smooth transition.
What Is Making Tax Digital for Income Tax?
Making Tax Digital for Income Tax changes how you keep records and report income to HMRC.
Under the new system, you must:
- Keep digital records of income and expenses
- Use HMRC-recognised accounting software
- Submit quarterly updates to HMRC instead of relying solely on one annual submission
These quarterly updates are described by HMRC as “light-touch summaries”. They are not additional tax returns and do not require full end-of-year adjustments.
How Quarterly Updates Work
MTD is designed to remove the traditional January panic.
Instead of scrambling once a year, your tax administration is spread evenly across the year. Once your income and expenses are recorded:
- The software creates a simple summary
- The update is submitted digitally to HMRC
Thousands of taxpayers have already tested the system through HMRC’s voluntary programme, with over 20,000 quarterly updates successfully submitted so far.
Will You Still Need to File a Tax Return?
Yes — Self-Assessment is not going away.
However, MTD makes the year-end process much easier:
- Your quarterly data is already stored in the software
- Your tax return becomes quicker and more accurate
- No last-minute searching for receipts or missing records
Key Transition Dates
- 2025/26 tax return: Filed in the usual way by 31 January 2027
- First MTD tax return (2026/27): Due by 31 January 2028
Penalties and the New Points-Based System
HMRC has introduced a fairer penalty system to support taxpayers during the transition.
- No penalty points for late quarterly updates during the first 12 months (from April 2026)
- After this period:
- Each late submission earns one penalty point
- A £200 fine is only charged once four points are reached
This means occasional mistakes will not immediately result in financial penalties.
Free Software and HMRC Support
HMRC has confirmed that:
- Free MTD-compatible software options will be available
- Support includes:
- Online guidance
- Webinars
- Instructional videos
Taxpayers who genuinely cannot use digital tools may apply for an exemption.
If you already work with an accountant or tax agent, HMRC strongly advises speaking to them as soon as possible.
What Should You Do Now?
HMRC’s message is clear: don’t wait.
Your next steps:
- Check whether you meet the £50,000 income threshold
- Review HMRC guidance on MTD for Income Tax
- Choose compatible accounting software
- Speak to your accountant to prepare properly
How NextGen Accountants Can Help
At NextGen Accountants, we support sole traders and landlords at every stage of the MTD journey. We help you:
- Confirm whether MTD applies to you
- Choose the right HMRC-approved software
- Set up digital record-keeping correctly
- Stay compliant and avoid unnecessary penalties
Preparing early means fewer surprises and a smoother transition when MTD becomes mandatory.
Act now — and let NextGen Accountants make Making Tax Digital simple.
📧 info@ngaccountants.co.uk
📞 +44 208 123 7363 | +44 786 269 6795
Disclaimer: This blog is for general information only and does not constitute professional advice. NextGen Accountants accept no liability for any loss arising from reliance on its content — please seek tailored advice before making decisions
