HMRC has spoken about a looming tax change (Image: Getty)
HMRC has issued an update about a major new tax requirement that will apply to millions of taxpayers. The tax authority has provided further details about the looming Making Tax Digital scheme.
This new project will come into force from April 2026, when thousands of taxpayers will be required to start using the system. The scheme will be expanded in stages, with more people gradually being mandated to regularly send over information.
Eligible taxpayers will be ordered to keep digital records of their income and expenses using software compatible with Making Tax Digital. You also have to send quarterly reports to HMRC and then submit a tax return and pay any tax due for the current tax year, by January 31 of the following year.
Some three million people will have to use the programme once it has been fully rolled out. In line with the new rules, sole traders and landlords will need to have software in place to maintain digital records, and then send over the details for each three-month period.
Who will be required to use Making Tax Digital?
From April 2026, any sole trader or landlord with a gross income of £50,000 or more in the 2024/2025 tax year will need to start using the scheme. This scope will extend from April 2027 to those with an income of £30,000 and above for the current tax year.
The Government has set out plans to further extend this to those with an income of £20,000 or more for the 2026/2027 tax year. HMRC was asked how it is notifying customers that they need to start using the scheme.
The group said it has a host of guidance on the gov.uk website, and is also issuing “direct communications”, live events, webinars and posting on social media, to let people know. HMRC explained: “The next phase of our marketing campaign will launch shortly after 31 January, to complement our direct-to-customer and stakeholder communications activities.
“We have made direct contact with our Making Tax Digital customers by writing to them to explain the changes and how to prepare. Customers received letters in Spring 2025 to raise awareness of their obligations.”
In 2025, HMRC launched its Agent Outreach effort, to contact small and medium-size accountancy practices, to urge them to get ready for the changes. Research from the tax body indicates over 99 percent of these agents know about the changes.
HMRC is also making changes to its penalty rules for those who fail to submit their details on time or pay any amounts they owe on time. The group said: “Customers joining Making Tax Digital in April 2026 will be subject to the new penalty reform rules if they fail to submit their tax return or pay what they owe on time.
“Penalty reform rules mean customers are given points for failing to submit quarterly updates or their tax return, on time.” HMRC said the new system will mean penalties are “more proportionate” to the length of time the payment is outstanding, as well as the amount that is due.
Customers who need to start using Making Tax Digital are advised to sign up early, to make sure you have everything in place in time for the April start date. Taxpayers can sign up and start using the system now, for the current 2025/2026 tax year. You can use compatible software to send your quarterly updates for the financial year so far.
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