Big changes are on the horizon for sole traders and landlords. From April 2025, HMRC will begin reaching out to individuals who may need to comply with Making Tax Digital (MTD) for Income Tax starting in April 2026. If you’re self-employed or earn rental income, it’s time to prepare for these changes.
Who needs to comply with MTD for Income Tax?
MTD for Income Tax is being rolled out gradually, with compliance based on total sales and rental income:
From 6 April 2026: Individuals with an annual turnover exceeding £50,000 must comply
From 6 April 2027: Individuals with an annual turnover exceeding £30,000 will be required to join
HMRC will determine eligibility based on income reported in your 2024/25 tax return, therefore it’s crucial to be aware of where you stand.
HMRC’s outreach plan
HMRC confirmed that it has already identified taxpayers who may need to comply from April 2026. Starting April 2025, HMRC will send letters informing them about their potential obligations. These notifications are based on provisional assessments from 2023/24 tax returns.
Main takeaways from HMRC’s announcement:
- Taxpayers will not be automatically signed up and therefore must actively register for MTD for Income Tax
- Agents can already sign up clients for 2024/25, with expanded options from April 2025
- There are two types of HMRC letters: one for those who can join now and another for those approaching the threshold
Don’t wait – get ready now!
With MTD for Income Tax just around the corner, now is the time to take action. Whether you’re a sole trader, landlord, or an agent advising clients, staying informed and prepared will make the transition smoother.
For further information, check out ICAEW’s MTD Income Tax Hub, which includes simple explainers, videos, and detailed guidance to help you navigate the changes ahead.
