The UK’s tax system is undergoing its biggest transformation in decades. After several delays, Making Tax Digital (MTD) for Income Tax officially came into effect from 6 April 2026 for the first group of taxpayers, bringing significant changes to how income and expenses are recorded and reported to HMRC.
If you’re a sole trader, landlord, or self-employed individual, it’s important to understand whether these new rules affect you and what steps you need to take to remain compliant.
What Is Making Tax Digital?
Making Tax Digital is HMRC’s initiative to modernise the UK tax system through digital record-keeping and more frequent reporting. The aim is to reduce errors, improve accuracy, and provide taxpayers with a clearer picture of their tax position throughout the year.
Who Must Comply?
The rollout is being introduced in phases based on gross income from self-employment and property:
Start Date | Annual Gross Income Threshold
6 April | 2026 Over £50,000
6 April | 2027 Over £30,000
6 April | 2028 Over £20,000
The threshold is based on combined gross income from self-employment and property before expenses are deducted.
Key Changes Under MTD for Income Tax
Paper records alone will no longer be sufficient for affected taxpayers. Businesses and landlords must maintain digital records using MTD-compatible software. This can include cloud accounting software or approved spreadsheet solutions with bridging software.
Instead of reporting once a year, taxpayers will submit updates every quarter. These updates provide HMRC with a summary of income and expenses during the reporting period.
Recognising the scale of the change, HMRC has confirmed that taxpayers who are mandated into MTD from April 2026 will not receive penalty points for late quarterly updates during the first year of operation (2026/27). However, penalties can still apply for late tax returns and late payment of tax liabilities.
This transitional period provides businesses with an opportunity to adapt to the new reporting requirements while minimising the risk of immediate penalties. Although MTD has already begun for some taxpayers, many businesses and landlords are still preparing for future phases of the rollout.
Making Tax Digital represents a major shift in tax administration, but with the right support it doesn’t have to be overwhelming.
At CPM Accountants we can help you:
- Determine when MTD applies to you.
- Set up compliant digital record-keeping systems.
- Select and implement suitable software.
- Submit quarterly updates and final declarations.
- Ensure ongoing compliance with HMRC requirements.