HM Revenue and Customs (HMRC) has issued an ‘act now’ warning to 860,000 people as they face new tax rules which began back on April 6, 2026. The rule applies to sole traders and landlords who are earning over £50,000 from self-employment and property and has been introduced as part of the Government’s plan to transform the UK’s tax system to support economic growth.
Over 860,000 sole traders and landlords should be using digital tax reporting with the introduction of Making Tax Digital (MTD) for Income Tax. The eligible UK sole traders and landlords should use the recognised software to keep digital records and send HMRC quarterly updates of their income and expenses. The UK’s tax, payments and customs authority stresses that these are not extra tax returns and HMRC has provided online sources to help those eligible navigate the new system.
HMRC offers free software options and once income and expenses are recorded, it can generate a simple summary to send to the authority.
Those eligible should note they must still file a tax return at the end of a tax year, by the following 31 January. Nevertheless, the software will already hold previous information from the quarterly updates, saving taxpayers from digging around for old receipts and records.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, said about the rule: “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.”
The first MTD tax return, covering the 2026 to 2027 tax year, will be due by 31 January 2028. Tax returns for the 2025 to 2026 tax year should be filed in the original way by 31 January 2027.
As taxpayers adjust to the new system, HMRC has promised those who joined MTD for Income Tax in April 2026 will not receive penalty points for late quarterly updates during the first 12 months.
However, otherwise, penalty points will be given for each late submission, with a £200 penalty applied if four points are reached.