HMRC has urged sole traders and landlords earning more than £50,000 to act now ahead of a major tax system update. From April 6, impacted Brits will have to submit quarterly digital records of income and expenses to HMRC, which is separate from the year-end tax return.
HMRC said the update will make it easier to file a tax return, because the Making Tax Digital (MTD) software will already hold information from the quarterly updates, so there’s no last-minute hunt for records or receipts. Once income and expenses are recorded, the software generates a summary to send to HMRC.
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.”
It will be carried out in a staged approach. This year, sole traders and landlords earning more than £50,000 through self-employment and property will have to sign up. The following year, the threshold will drop to £30,000, and in April 2028, it will become £20,000.
A £200 penalty will be issued for repeated late submissions. Penalty points are issued for every late submission, and the fine is triggered once a person receives four. HMRC said this will prevent immediate fines for occasional slip-ups.
The Government said that to support the transition, it will not issue penalty points for the first 12 months, for customers joining MTD for Income Tax in April 2026.
Thousands of sole traders and landlords have already signed up for MTD for Income Tax, with more than 12,000 quarterly updates submitted through a voluntary testing programme.
Those joining MTD in April 2026 will still file their tax return for the 2025 to 2026 tax year in the usual way by January 31, 2027, as this covers the period before MTD begins.
The first MTD tax return, covering the 2026 to 2027 tax year, will be due by January 31, 2028.