Prepare for Digital Tax Reporting by April 2026

This month HM Revenue and Customs (HMRC) reported that more than 860,000 sole traders and landlords across the UK will need to start using digital tax reporting from 6 April 2026, as Making Tax Digital (MTD) for Income Tax moves from preparation to mandatory rollout.

The change applies to individuals earning over £50,000 a year from self-employment and/or property income. With just two months to go, HMRC is urging those affected to act now to avoid a last-minute rush.

What’s changing?

From April 2026, eligible taxpayers must:

• Keep digital records of income and expenses

• Use HMRC-recognised software

• Submit quarterly updates to HMRC

These quarterly submissions are described as “light-touch” updates. They are not additional tax returns and do not mean paying tax four times a year. Instead, they provide a more regular snapshot of business income and expenses, helping individuals stay on top of their tax position throughout the year.

At the end of the tax year, a final declaration will still be required to confirm overall income and calculate the final tax bill.

Why is this happening?

The rollout forms part of the Government’s wider plan to modernise and digitise the UK tax system. The aim is to reduce errors, improve accuracy and make tax administration more efficient. HMRC says the move will help support economic growth by simplifying processes and giving businesses clearer visibility of their finances.

Thousands of taxpayers are already testing the system voluntarily, with many reporting that spreading tax admin across the year feels more manageable than facing a single annual deadline.

How software can help

A wide range of approved software is available to support the transition. Many packages:

• Automatically record income and expenses

• Connect directly to business bank accounts

• Provide real-time tax estimates

• Submit updates directly to HMRC

For some businesses, this may mean moving from spreadsheets or paper records to cloud-based accounting software. Others who already use digital tools may simply need to ensure their software is MTD-compatible.

Who needs to act now?

If you are a sole trader or landlord with combined gross income over £50,000 from self-employment and property, you will be required to comply from April 2026.

Those earning between £30,000 and £50,000 are expected to join the system at a later date, so it is sensible for them to start considering their options as well.

Why early preparation matters

Although April 2026 may seem some way off, setting up software, adjusting processes and becoming comfortable with quarterly reporting can take time. Starting early allows you to:

• Choose the right software for your needs

• Get support and training if required

• Test systems before they become mandatory

• Avoid compliance issues or penalties

For many businesses, this is also an opportunity to improve record-keeping and gain clearer insight into cash flow and profitability.

Prepare for Digital Tax Reporting

If you think you may be affected, now is the time to review your income levels, check whether you fall within scope and begin exploring suitable digital solutions. Acting early will make the transition smoother and help ensure you are fully prepared when the new rules come into force in April.

Contact our team for a free quote to manage your digital tax reporting.

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Source: Gov.uk