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A major transformation of the UK tax system is just around the corner. From April 2026, Making Tax Digital (MTD) for Income Tax Self Assessment (ITSA) will become mandatory for individuals and businesses with qualifying income over £50,000. This is just the start of a phased rollout that will extend to millions more over the next two years.
If you’re self-employed or a landlord—or advising clients who are—it’s time to prepare for the biggest overhaul to tax filing in a generation.
What Is Changing in 2026?
From 6 April 2026, anyone earning over £50,000 in qualifying income (from self-employment, property income, or both) will be required to:
- Keep digital records
- Submit quarterly updates using MTD-compliant software
- Submit a final end-of-year statement
The first quarterly submission deadline is 7 August 2026, and a new penalty regime for non-compliance will apply from the outset.
Who’s Affected—and When
This rollout will happen in three key phases:
- April 2026: Income over £50,000 – 864,000 people
- April 2027: Income between £30,000–£50,000 – 1,077,000 people
- April 2028: Income between £20,000–£30,000 – 975,000 people
That brings the total number of individuals expected to fall under MTD for Income Tax to over 2.9 million by 2028.
And this doesn’t include the 4 million more below the £20,000 income threshold, many of whom may be drawn in if the government lowers the bar further.
Software: The New Cost of Compliance
One of the biggest shifts MTD introduces is the requirement for accounting software. Currently, only half of landlords and self-employed taxpayers use software for their tax returns. But under MTD, everyone affected will need a digital tool to file.
For many, this will mean:
- Learning new systems
- Paying for a monthly subscription, often around £20/month, or £240/year
That’s a significant new cost for sole traders, small landlords, and micro-businesses. And with around 37% of £50,000+ earners and 59% of £20k–£50k earners without accountants, many will be figuring this out on their own.
Are There Any Free Options?
Yes, but they’re limited. Sage launched Sage Accounting Individual Free in 2023—a stripped-down digital tool aimed at freelancers and users with simple accounting needs. The company claims it will remain free and is scalable as users’ needs grow.
Sage isn’t alone, but the free software market is still small, and users must ensure their tool is MTD-compatible. Relying on spreadsheets or manual records will no longer be allowed under the new rules.
The Agent Advantage
Those with authorised accountants or tax agents are far more likely to be ready:
- 78% of £50K+ earners with agents used commercial software
- Only 21% without agents did the same
If you don’t yet have a tax advisor or accountant, now may be the time to find one—especially as filing becomes more frequent, technical, and time-sensitive.
MTD Will Expand Rapidly
Although it starts with higher earners, MTD’s reach will expand quickly. By April 2028, individuals with income just over £20,000 will be required to comply, dragging in nearly a million more taxpayers.
This poses major challenges:
- Digital literacy: Many lower-income self-employed individuals are not tech-savvy.
- Affordability: Software costs will disproportionately affect those on tighter margins.
- Communication: With up to a quarter of the initial £50K+ cohort unaware or unrepresented, outreach is a serious concern.
Why It Matters Now
Even though MTD for Income Tax doesn’t officially begin until 2026, the time to act is now. Businesses and individuals must begin:
- Understanding their qualifying income
- Researching software options
- Preparing for quarterly reporting
- Seeking advice if not already represented
Waiting until the deadline could lead to rushed decisions, errors, or penalties—especially once the new compliance regime kicks in.
Start Preparing Now
The government’s vision of a fully digital tax system is becoming a reality. For some, it will simplify their accounting and offer real-time insight into their tax obligations. But for others, it introduces a new layer of complexity—and cost. Whether you’re a landlord, self-employed professional, or tax adviser, now is the time to gear up for MTD—because digital tax is no longer optional.