A major tax shake-up is set to catch out thousands of landlords and self-employed people, Tax Natives has warned.
Millions of self-employed individuals and landlords are being urged to prepare for a major overhaul in how they report their income to HMRC. From 6th April 2026, those earning over £50,000 from self-employment or property income will need to comply with Making Tax Digital (MTD) for income tax – a significant shift towards digital record-keeping and quarterly submissions.
The move is expected to affect approximately 780,000 people in its first wave, with another 970,000 to follow from April 2027 and further expansion in 2028.
Who will be affected?
The first group affected includes sole traders and landlords with gross income over £50,000. Those earning between £30,000 and £50,000 will follow in April 2027, with further expansion to £20,000+ earners from 2028.
Importantly, the income threshold is based on gross income, not profits — which means even those making modest earnings after expenses could still be caught by the new rules.
The system will require eligible individuals to keep digital records of their income and expenses, use compatible software to manage their tax affairs, and submit updates to HMRC every quarter.
HMRC is currently encouraging early adopters to join the MTD testing programme, giving them time to familiarise themselves with the new system and access dedicated support.
MTD for VAT, which was rolled out previously, has reportedly helped over two million businesses reduce errors and increase efficiency. A 2021 report found that 69% of businesses saw at least one benefit, with 67% reporting fewer record-keeping mistakes.
According to HMRC, the change is designed to improve accuracy, reduce errors, and save time. They believe the digital transition will help taxpayers stay on top of their obligations while offering a clearer picture of their tax position year-round. But experts caution that not all taxpayers will find the transition easy.
Andy Wood, international tax expert at Tax Natives, commented: “Many people assume these thresholds apply to their net income after tax relief, but that’s not the case. It’s based on total income before deductions, so the scope is broader than some might expect.
“This is the biggest change to personal tax reporting since Self Assessment was introduced. While MTD aims to streamline the process, it also places a much greater administrative burden on individuals who may not be set up for quarterly reporting.
“It’s not just about moving tax online – it’s about shifting to real-time reporting. That means landlords and sole traders will need to adjust how they manage their finances throughout the year, not just at tax return time.
“There are benefits to this system – especially for those already using cloud accounting software. But for many smaller landlords or sole traders, this could mean new costs, new software, and a steep learning curve. Planning ahead is crucial.
“There’s definitely potential for long-term savings and greater accuracy. But the key to unlocking those benefits lies in how well taxpayers adapt to the new systems. A proactive approach will be vital.
“Making Tax Digital is coming – and for many, it’s coming sooner than they realise. Now is the time to speak with an accountant or tax adviser, get the right software in place, and understand how this affects your personal circumstances. The cost of doing nothing could be high, both financially and in terms of compliance.”
