HMRC has alerted 864,000 taxpayers about the recent implementation of a new tax system. Known as Making Tax Digital, this method requires individuals to digitally report their income tax. It became obligatory in April 2026 for sole traders and landlords with income exceeding £50,000.
Under this new system, taxpayers must provide quarterly updates on their income and expenses, with the initial deadline set for August 7. These updates need to be submitted using HMRC-approved software. Following each update, an estimated tax bill will be generated, and individuals are still required to file a tax return by the usual deadline of January 31.
Late payment of owed taxes must also be settled by January 31 to avoid penalties determined by a points system. Accumulating four points due to missed quarterly submissions results in a £200 fine. However, any accumulated penalty points expire after 24 months of compliance.
Currently, there is a 12-month transitional period for the first year of Making Tax Digital, during which no penalty points will be issued for late quarterly updates. In contrast, under the existing self-assessment rules, a £100 fine is immediately imposed for late submission of the self-assessment tax return, due by January 31.
The expansion of Making Tax Digital will encompass individuals earning above £30,000 from April 2027 and those earning over £20,000 from April 2028. VAT-registered businesses have been mandated to utilize Making Tax Digital for VAT since 2022.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, emphasized the significance of this tax system change. He encouraged those who have not yet signed up to do so promptly, emphasizing that the process is straightforward and can be initiated by searching ‘Making Tax Digital for Income Tax’ on GOV.UK.
