Individuals earning £50,000 or more in combined gross income from sole trading and property rentals during the 2024/25 tax year must now submit online updates on their income and expenses, effective April 6.
Making Tax Digital Phase One Rolls Out
HMRC’s Making Tax Digital (MTD) initiative, which began for VAT-registered businesses in 2022, now extends to certain self-assessment taxpayers. Those reaching the £50,000 threshold needed to register for income tax self-assessment under MTD ahead of this date, unless they qualify for exemptions.
Exemptions apply automatically to some, but others must verify their status through official channels. Eligible taxpayers now submit four quarterly updates, plus their annual tax return and payment, using compatible software.
Grace Period and Penalties
Quarterly filing begins today, but HMRC offers a grace period with no penalties for missing updates during the 2026/27 tax year to ease the transition. However, penalties apply for failing to maintain records, late tax returns, or delayed payments.
Future Expansion of MTD
This launch represents the first phase of a three-year rollout. Sole traders and landlords with £30,000 in qualifying income for the 2025/26 tax year join from April 6, 2027. Those with £20,000 for the 2026/27 tax year follow on April 6, 2028.
Expert Insights on Tax Changes
Ellen Milner, Director of Public Policy at the Chartered Institute of Taxation (CIOT), noted: “Spring signals fresh starts, including a new tax year and updated rules for taxpayers. While business and agricultural assets now fall under inheritance tax scope—with added allowances and lower rates—many estates will require valuations. Farmers and business owners should prioritize tax planning.
“Yet, the standout change this year is the initial rollout of Making Tax Digital for Income Tax, digitizing the system for nearly 900,000 self-assessment filers. Over three years, HMRC aims to include 2.9 million taxpayers, mandating digital records, quarterly updates, and annual returns via approved software.”
Check eligibility and guidance on the UK Government website.
