HMRC has alerted 864,000 taxpayers about a new tax system implementation with a two-week notice period. The new system, called Making Tax Digital, mandates the digital reporting of income tax. It now applies to sole traders and landlords with qualifying income exceeding £50,000 since April 2026.
Under this system, taxpayers must provide quarterly updates on their income and expenses. The initial update deadline is set for August 7. These updates need to be submitted using HMRC-approved software. Following each update, taxpayers will receive an estimated tax bill and still have to file a tax return by the usual January 31 deadline.
Late payment of owed taxes also carries a deadline of January 31, with penalties based on a points system for missed submissions. Accumulating four points due to late quarterly submissions incurs a £200 fine. However, any accrued points expire after 24 months of compliance. Additionally, there is a 12-month grace period for the first year of Making Tax Digital, exempting taxpayers from penalty points for delayed quarterly updates during this period.
Currently, under the self-assessment rules, a £100 fine is imposed for late submission of the self-assessment tax return, with the deadline set at January 31. Making Tax Digital will be gradually expanded to individuals earning over £30,000 from April 2027 and those earning over £20,000 from April 2028. VAT-registered businesses have been required to adopt Making Tax Digital for VAT purposes since 2022.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, emphasized the significance of this transition, stating that many sole traders and landlords are now digitally maintaining records and preparing for their first quarterly update. He encouraged those not yet enrolled to visit GOV.UK and search ‘Making Tax Digital for Income Tax’ to begin the process.
