HMRC warning as over 800,000 face new digital tax rules

Sole traders and landlords earning more than £50,000 from self-employment and property need to prepare for Making Tax Digital (MTD) for Income Tax, which takes effect from April 6 this year.

Under the new rules, those who meet eligibility criteria will be required to use software to maintain digital records and submit quarterly updates of income and expenses to HMRC.

Those joining MTD in April this year 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.

The government has announced that customers joining MTD for Income Tax in April 2026 will not receive penalty points for late quarterly updates, for the first 12 months.

Under the new system, penalty points will be given for each late submission, with a £200 penalty only applied once four points are reached. 

According to HMRC, only those who "genuinely cannot" use digital tools can apply for an exemption.