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It’s not optional and will affect many workers
Landlords, sole traders and the self-employed are being urged to prepare for the “death of the traditional income tax return” in April. Accountancy and business advisory firm Azets is warning that those with gross income above £50,000 per year will have to comply with the new Making Tax Digital (MTD) regime from next month.
Under the HMRC shake-up, qualifying individuals and businesses will be required to keep digital records, use MTD-compatible software and submit updates every quarter, as well as a final declaration. The overhaul – the most significant since the introduction of self-assessment in 1997 – will bring the tax system closer to real-time and affect 864,000 people and landlords nationwide from April 6, 2026, with numbers predicted to rise to 2.9m within three years.
Fraser Campbell, UK head of ABAS at Azets, which has offices in Plymouth, Bristol, Gloucester, Truro and South Molton, near Barnstaple in Devon, said: “MTD truly signifies the death of the traditional income tax return. It represents a major change with the introduction of digital reporting obligations for hundreds of thousands of landlords, sole traders and the self-employed from April onwards.
“It is crucial that they put plans in place to deal with this shift to ensure a smooth and compliant transition to the new regime as the April deadline is fast approaching. While this will mean changes in processes and software that is compliant with MTD, the switch will bring advantages too with access to near real-time digital information about taxes for thousands of people for the first time.
“It will place accurate financial information into the hands of you or your tax adviser more regularly to assist with visibility over business performance, forward tax planning and forecasting as well as a smoother year-end process.”
Azets said it became the first accountancy firm in the UK to submit a MTD quarterly update for a landlord last June when it worked collaboratively with HMRC and the global small business platform Xero during a testing phase of the new system prior to a public beta programme.
It urged landlords, sole traders and the self-employed to prepare for MTD by checking their qualifying income now to see if they fall under the new reporting obligations.
It also said to bear in mind that the threshold will drop in subsequent years, so start preparations if you are likely to qualify for MTD in 2027 or 2028.
Also, ensure that your – or your accountant’s – software is HMRC-approved so it is compatible with MTD. Start using software now for a smooth transition in April
HMRC Making Tax Digital explained
Azets added that there could be MTD exemptions – check on the HMRC website or seek expert advice. According to HMRC, nearly two million VAT-registered businesses have been required to use MTD software for recordkeeping and returns since April 2022.
Landlords, sole traders and the self-employed with the qualifying income of more than £50,000 for the 2024-25 tax year will fall into scope for MTD from April 6.
Under a phased roll-out, from April 2027 those with a qualifying income of £30,000 will fall into scope. From April 2028, those with qualifying income over £20,000 will be included.
