HMRC warning over major tax change coming in months

HMRC has begun contacting customers about the rollout of Making Tax Digital (MTD) for Income Tax, which will completely change how millions of people report earnings from self-employment and property income.

And many people may not realise they are already on course to be affected.

In guidance sent to customers, HMRC warned: “If you get income from self-employment and/or property, you’ll legally need to use Making Tax Digital for Income Tax” once earnings pass certain thresholds.

The key dates households are being told to check now

Under the phased rollout, the rules will apply from:

• April 2026 for people with turnover above £50,000
• April 2027 for people with turnover above £30,000
• April 2028 for people with turnover above £20,000

The thresholds are based on turnover rather than profit – something experts say could catch many people out.

That means landlords, side hustlers and sole traders with relatively modest profits could still be pulled into the system if their total income exceeds the limit.

What HMRC says people need to do

Under Making Tax Digital, affected taxpayers will no longer simply file one annual Self Assessment tax return.

Instead, they will need to:

• Keep digital records
• Use compatible software
• Submit quarterly updates to HMRC
• Complete a final declaration each year

HMRC said the changes are now a “legal requirement” for those crossing the thresholds.

The tax authority is urging people to prepare early, warning customers to start “making informed software choices” and consider “practical steps you can take to prepare your business”.

The groups most likely to be affected

The changes apply to income from:

• Self-employment
• Rental properties
• Joint property ownership

HMRC is also specifically targeting sole traders and landlords without accountants or bookkeepers with additional webinars and guidance.

In one message to customers, HMRC said: “If you’re a sole trader or landlord without an accountant or bookkeeper… get the latest information about MTD, to help you get ready.”

The sessions will explain:

• “The rules, who will be affected and when”
• “How to prepare for MTD for Income Tax”
• “The actions you will take”
• “Using MTD for Income Tax – following the rules and considering how you can utilise any benefits and opportunities”

Why some people may not realise they are affected

Experts warn that many people still assume the rules only apply to larger businesses.

But the final £20,000 threshold from 2028 is expected to draw in huge numbers of smaller landlords, freelancers and side hustlers.

The fact that the thresholds are based on turnover – before expenses are deducted – could also catch people off guard.

Someone earning rental income alongside freelance work could breach the limit far earlier than expected.

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HMRC launches webinars and online help

HMRC is now encouraging people to attend official webinars ahead of the rollout.

Separate sessions are being offered for:

• Businesses
• Landlords
• Joint property owners
• Sole traders without accountants

The tax authority has also published online videos explaining “How do I sign up for Making Tax Digital for Income Tax”.

HMRC said the webinars will help customers understand “what you need to do”, “who will be affected” and how to get ready before the legal deadlines arrive.

Have you signed up for Making Tax Digital? Tell us in the comments below.