HMRC announce a 'significant' change that will affect certain people earning over £50,000

Eligible taxpayers are being encouraged to sign up to a testing programme to get ahead of the changes

HMRC has announced a 'significant' change to the tax system for certain people earning over £50,000.

From next year, sole traders and landlords with qualifying income over £50,000 will be required to keep their records digitally as part of the Making Tax Digital (MTD) for Income Tax scheme.

The scheme will come into effect on April 6, 2026 as part of the government's Plan for Change to deliver economic growth. The way in which eligible individuals keep records and report their income to HMRC will be significantly different.

By keeping digital records throughout the year, the government says sole traders and landlords can save hours previously spent gathering information at tax return time.

James Murray MP, Exchequer Secretary to the Treasury, said: "MTD for Income Tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth.

"By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.

"This is a crucial step in this government’s decade of national renewal and our Plan for Change, as we clear away barriers that hold back growth."

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Quarterly updates will be introduced and are intended to spread the workload more evenly throughout the year and bring the tax system closer to 'real-time reporting'.

The scheme also hopes to help businesses stay on top of their finances and avoid the last-minute rush of annual tax returns.

Craig Ogilvie, HMRC’s Director of Making Tax Digital, said: "MTD for Income Tax is the most significant change to the Self Assessment regime since its introduction in 1997.

"It will make it easier for self-employed people and landlords to stay on top of their tax affairs and help ensure they pay the right amount of tax.

"By signing up to our testing programme now, self-employed people and landlords will be able to familiarise themselves with the new process and access dedicated support from our MTD Customer Support Team, before it becomes compulsory next year."

When the change is implemented next April, individuals with qualifying income above £50,000 will need to keep digital records, use MTD-compatible software and submit quarterly summaries of their income and expenses to HMRC.

According to gov.uk, qualifying income includes gross income from self-employment and property before any tax allowances or expenses are deducted.

People with qualifying income above £30,000 will be required to use MTD for Income Tax from April 2027. And the threshold will then decrease to £20,000 from April 2028.