Making Tax Digital hits 800,000 in the first wave of reform
Nearly 800,000 self-employed individuals and landlords earning over £50,000 will need to overhaul how they handle income tax, as HMRC prepares to roll out the next phase of its Making Tax Digital (MTD) initiative from April 2026.
Described by HMRC as the most significant change to Self Assessment “since its introduction in 1997,” MTD for Income Tax will require taxpayers to keep digital records and submit quarterly updates via approved software, with penalties for non-compliance expected in the future.
Only 3% of affected individuals are currently using the required software, underlining the scale of the transition ahead.
According to a survey by Accountex London, 80% of accounting professionals identify MTD for Income Tax as the sector’s “biggest challenge” over the next 12 months.
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.”
From April 2027, the scope of MTD will expand further, encompassing self-employed individuals and landlords earning between £30,000 and £50,000.
Letters in the post
To prepare the system and its users, HMRC has started sending letters to those it believes will be mandated to join the programme.
These communications outline key timelines and the specific steps required. Ogilvie urged individuals to join HMRC’s testing programme to “help shape the final service” and ease the transition.
Clive Barnett, External Readiness Lead at HMRC, added:
“Joining our MTD for Income Tax testing phase now gives businesses and agents hands-on experience before April 2026. Participants can prepare for this significant change with benefits such as dedicated support and penalty-free quarterly submissions.”
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Staffing pressure and internal buy-in
For many firms, the pressure lies not just in onboarding clients, but also in managing internal transformation.
Eriona Bajrakutaj, founder of Volt Digital Transformation, noted that the new system’s increased frequency of submissions may require firms to expand their teams.
“If you do not implement digital systems, you will need the extra capacity because we’re now going to see clients five times a year. I think managing client expectations will be a big challenge because it means clients will need to reframe their business model to ensure it can report in a digital format,” she said.
Bajrakutaj added that firms should also prepare for internal resistance:
“The biggest push back to be aware of is from your team. If they don’t want to go on the digital journey, it will hinder how fast you get there and how well you can service your clients.”
What HMRC says is at stake
The government argues that the long-term benefits outweigh the near-term burden. According to James Murray MP, Exchequer Secretary to the Treasury:
“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.”
Quarterly updates are expected to reduce the year-end administrative load, encourage real-time financial oversight, and boost compliance.
HMRC insists that MTD aligns with the government’s broader “Plan for Change” to support economic growth by removing administrative barriers.
What happens next?
With the April 2026 mandate just under two years away, HMRC is urging early engagement. “We are issuing letters to customers we believe will be mandated,” Ogilvie confirmed, while highlighting the department’s efforts to provide “a package of support” around onboarding and long-term adoption.
Whether the message is landing with its intended audience remains uncertain. With 97% of those affected yet to adopt the required software, a steep climb remains.
