More than 860,000 self-employed people and landlords will have to start filing regular digital tax updates with HMRC from April as the government’s long-planned Making Tax Digital (MTD) programme enters its next phase.
From 6 April 2026, sole traders and landlords earning more than £50,000 a year from self-employment and property income will be required to keep digital records and submit quarterly updates to HMRC using compatible software. The reform represents one of the biggest changes to the self-assessment system in decades.
The government says the overhaul will modernise tax administration, reduce errors and help taxpayers keep better track of what they owe. Critics, however, argue it risks piling further administrative pressure on small business owners already grappling with rising costs and tighter margins.
What is Making Tax Digital?
Making Tax Digital is a government initiative designed to move the UK tax system away from annual paper-based self-assessment returns towards digital record-keeping and more frequent reporting.
Under the new rules, affected taxpayers must:
• Keep digital records of income and expenses.
• Submit four quarterly updates to HMRC.
• Submit an end-of-year final declaration to confirm their overall tax position.
For a sole trader, this means at least five submissions per year — four quarterly updates and one final year-end return.
For individuals who are both self-employed and landlords, the reporting burden increases further. Separate updates are required for each income stream, meaning some taxpayers could face more than 10 submissions annually, particularly if VAT reporting is also required.
The rollout is being phased in by income level. From April 2026, the £50,000 threshold applies. From April 2027, the threshold falls to £30,000, affecting an estimated further 970,000 people. By 2028, those earning more than £20,000 will also be required to comply, potentially bringing millions more into the system.
Key deadlines for those starting in April 2026
For taxpayers entering the system next April, the first compliance cycle will include:
• 6 April 2026 – begin keeping digital records under MTD
• 7 August 2026 – first quarterly update due
• 7 November 2026 – second quarterly update due
• 31 January 2027 – traditional self-assessment return for 2025/26 still required
• 7 February 2027 – third quarterly update
• 7 May 2027 – fourth quarterly update
• 31 January 2028 – first full MTD annual declaration deadline
HMRC says free software options will be available, and that digital tools will generate summary reports to submit directly to the tax authority.
The penalty system has also been redesigned. Rather than issuing immediate fines for late submissions, HMRC will operate a points-based system. A £200 fine will only be triggered once four penalty points have been accumulated, allowing for occasional missed deadlines without instant financial consequences.
While ministers argue the system will ultimately reduce errors and smooth out tax administration, many small business representatives fear it will increase compliance costs.
Taryn Lee Johnston, owner of publishing firm The FCM Group, said quarterly reporting adds further strain to already stretched entrepreneurs.
“Quarterly reporting under Making Tax Digital was sold as a way to modernise the system. The concern is not just frequency, but cost, time and mental bandwidth,” she said.
“Many small business owners do not have in-house finance teams. They will either need to pay accountants more or spend more hours on compliance rather than growing their businesses.”
She added that at a time when the government is seeking to boost entrepreneurship and economic growth, increasing reporting requirements may send “a conflicting message”.
Others in the sector warn that preparation will be critical. Gwion Thomas, founder of accounting app LITT, said affected taxpayers should not underestimate the shift.
“While HMRC’s goal of improving accuracy is positive, the priority now is preparation,” he said. “Don’t leave it to a last-minute scramble and understand what you need well ahead of April’s rollout.”
Some technology providers argue the new system could help business owners manage cash flow more effectively.
Research from enterprise software company Sage suggests that almost a quarter of UK business owners spend more than six hours completing their annual tax return. Lisa Ewens, senior vice president for small business at Sage, said spreading tax reporting across the year could reduce pressure.
“Digital tax tools can help spread the workload, reduce last-minute stress and give business owners back valuable time,” she said. “They also provide a clearer picture of what’s owed throughout the year, so owners can plan and budget with more confidence.”
The bigger concern for some is not just the April changes but the expanding scope of the regime. As income thresholds fall over the next two years, hundreds of thousands more sole traders and landlords will be brought into quarterly reporting.
With youth self-employment rising and many individuals operating side hustles alongside salaried work, the number of people affected could continue to grow.
For now, those earning above £50,000 from self-employment or property income have just over a month to ensure they are ready for digital record-keeping and quarterly updates.
Whether Making Tax Digital becomes a genuine productivity boost or another layer of administrative burden will likely depend on how seamlessly small businesses adapt — and how effectively the new system performs once fully in operation.
