Act now: 864,000 sole traders and landlords face new digital tax rules in April

More than 860,000 sole traders and landlords across the UK are being urged to act now, with just two months remaining before major changes to the tax system come into force under Making Tax Digital (MTD) for Income Tax.

From 6 April 2026, those earning over £50,000 from self-employment and property will be required to keep digital records and submit quarterly updates to HM Revenue and Customs (HMRC) using approved software.

The changes mark a significant shift in how many small business owners and landlords manage their tax affairs, forming part of the Government’s wider plan to modernise the UK tax system and support economic growth.

What is Making Tax Digital for Income Tax?

Under MTD for Income Tax, eligible sole traders and landlords will need to use recognised software to:

• Keep digital records of income and expenses

• Submit light-touch quarterly updates to HMRC

HMRC has stressed that these quarterly updates are not additional tax returns, but regular summaries designed to reduce errors and spread administrative tasks more evenly across the year.

At the end of the tax year, individuals will still be required to submit an annual tax return, but the information from quarterly updates will already be stored within the software, reducing the need for last-minute record gathering.

Who is affected and when?

From 6 April 2026, MTD for Income Tax will apply to sole traders and landlords with combined self-employment and property income exceeding £50,000.

Those joining the system in April 2026 will:

• File their 2025–26 tax return in the usual way by 31 January 2027, covering income earned before MTD begins

• Submit their first MTD tax return for the 2026–27 tax year by 31 January 2028

HMRC has confirmed that thousands of sole traders and landlords have already signed up voluntarily, with more than 12,000 quarterly updates successfully submitted during testing.

Support, exemptions and free software

HMRC says a wide range of free support is available to help people prepare, including:

• Online guidance

• Webinars

• Instructional videos

Further information and guidance are available on GOV.UK.

Free software options are also available, allowing users to record income and expenses and automatically generate summaries for submission to HMRC. Individuals who genuinely cannot use digital tools may apply for an exemption.

Penalty system and transitional protections

To support the transition, the Government has announced that customers joining MTD for Income Tax in April 2026 will not receive penalty points for late quarterly updates during the first 12 months.

Under the new system, penalty points are issued for late submissions, with a £200 penalty only applied once four points are reached, meaning occasional delays will not result in immediate fines.

HMRC urges action now

Craig Ogilvie, HMRC’s Director of Making Tax Digital, said:

“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.

“This will make it easier for sole traders and landlords to stay on top of their tax affairs and help ensure everyone pays the right amount of tax.

“Spreading your tax admin throughout the year means avoiding that last minute scramble to complete a tax return every January. Go to GOV.UK and start preparing today.”

HMRC is advising those within scope to read the guidance, choose suitable software and sign up via GOV.UK, while individuals who use a tax agent should speak to them about preparing for the change.