Changes are being put in place which will affect thousands of people
HMRC’s new system meant to “split and spread the admin” of sorting out Income Tax will come into force for some from April 6 this year. This will change the way thousands of people interact with the tax system, if they meet one vital criteria.
Taking to X, HMRC issued an alert reminding liable people that the Making Tax Digital system is coming into play with a short clip that warned: “Time is running out to get ready for Making Tax Digital…There’s no avoiding it. Tax is changing.”
The new system will allow people to make quarterly reports on their income and expenses rather than the annual Self Assessment tax return system that is currently being used. Sole traders or landlords with a turnover of £50,000 or more will need to start using ‘recognised software’ to track their income and expenses from April 6, 2026.
These softwares will include bookkeeping or account apps with free and paid options. HMRC has published a list of recognised providers that people can choose from.
The deadline for their first Making Tax Digital report will be on August 7. HMRC will also be introducing a “points-based penalties” system for people who miss these submission deadlines.
Missing one deadline will earn you penalty points and you’ll be liable to pay a fine if you get too many points. The exact number of points you’ll get will depend on what type of update you were expected to send to HMRC.
You may also receive penalties if you records aren’t adequate or accurate. More information can be found on the Making Tax Digital website.
The system is being rolled out in phases and the exact date you need to start using it for Income Tax will depend on how much you earn. Those earning over £50,000 will need to use it from April 6, 2026.
Sole traders and landlords earning £30,000 or more in the 2025/2026 tax year will need to start using it from April 6, 2027. Finally, those earning £20,000 or more in the 2026/2027 tax year will need to use the new system from April 6, 2028.
While the new system is meant to simplify and replace the current Self Assessment route people use to pay their Income Tax dues, for the first year people will still need to fill out their Self Assessment tax return.
This means that those who are eligible to start using the new system this April will still need to sort out their Self Assessment return and bill next January to account for the 2025/2026 tax year. The National Careers Service has published some free training on digital record keeping to help people with the transition.
HMRC guidance also notes: “There are lots of ways to improve your digital skills. Not all learning has to take place in a classroom – you can learn in your own pace and in your spare time.”
