HMRC has confirmed that approximately 2.9 million self-employed individuals and landlords will be brought into Making Tax Digital (MTD) for Income Tax Self Assessment between 2026 and 2028. This represents a substantial expansion of the digital reporting regime that already applies to VAT-registered businesses.
What Is Making Tax Digital?
Making Tax Digital is HMRC's initiative to modernise the tax system through digital record-keeping and quarterly updates. Under MTD for Income Tax, eligible taxpayers must keep digital records of their business income and expenses using compatible software, and submit quarterly updates to HMRC throughout the year, rather than relying solely on an annual Self Assessment return.
The Phased Rollout Schedule
The expansion will be implemented in three stages based on income thresholds:
- April 2026: Approximately 864,000 individuals with qualifying income exceeding £50,000 annually
- April 2027: Around 1,077,000 taxpayers earning between £30,000 and £50,000
- April 2028: A further 975,000 individuals with income of £20,000 to £30,000
It's important to note that "qualifying income" refers to total self-employment and property income combined. If you have both rental income and self-employment income, these are added together to determine whether you meet the threshold.
What This Means for Affected Taxpayers
If you fall within these income brackets, you'll need to transition from traditional record-keeping methods to digital software. This means:
- Maintaining digital records of all business income and expenditure
- Using MTD-compatible software or bridging software
- Submitting quarterly updates to HMRC (typically by the month-end following each quarter)
- Submitting a final declaration (End of Period Statement) after the tax year ends
You'll still need to complete a Self Assessment tax return, but much of the information will already have been shared with HMRC through your quarterly updates.
Preparing for the Change
If you're approaching the relevant income threshold or are within the first phase, now is the time to prepare. Consider:
- Researching MTD-compatible software options that suit your business needs
- Ensuring your record-keeping is already comprehensive and organised
- Speaking with your accountant about how MTD will affect your tax compliance
- Budgeting for any software costs or additional professional fees
Many cloud accounting packages now offer MTD-compatible features, ranging from basic bridging software to comprehensive accounting solutions with invoicing, bank feeds, and expense tracking.
Current Income Below the Threshold?
Even if your income currently falls below £20,000, it's worth familiarising yourself with MTD requirements. HMRC may extend the scheme further in future years, and adopting digital record-keeping voluntarily can improve your financial management and make tax compliance easier.
Getting Support
The transition to Making Tax Digital represents a significant change for many small business owners and landlords. If you're concerned about meeting the requirements or unsure which software to choose, speaking with a qualified accountant can help ensure a smooth transition and ongoing compliance. Check the current income thresholds and implementation dates on the HMRC website, as these details are confirmed closer to each phase.