HM Revenue & Customs (HMRC) is sending letters to more than 200,000 sole traders and property owners, alerting them to the mandatory shift to the Making Tax Digital (MTD) system starting April 2026. Those receiving letters are individuals with income exceeding £50,000 who filed tax returns by August 31, 2025.
Arjun Kumar, founder of Taxd, emphasizes the importance of compliance: “Ignoring HMRC’s communication about the MTD transition could result in significant penalties.” Businesses failing to keep digital records risk fines of up to £3,000 per quarter.
The government plans to lower the income threshold further. From April 6, 2028, sole traders and landlords earning over £20,000 in the 2026-27 tax year will also be required to adopt MTD for Income Tax. The rollout will occur in two stages: from April 2026 for those with income over £50,000, and from April 2027 for those with income above £30,000.
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Under MTD, affected individuals must submit quarterly digital reports aligned with the tax year, starting with the first quarter (April to June) due by August. This reporting requirement applies to trading and property income subject to Income Tax and Class 4 National Insurance contributions.
The Labour Party government reiterates that by April 2027, taxpayers with qualifying incomes over £30,000 will be legally obligated to use the digital system. HMRC is intensifying efforts to ensure a smooth transition while reminding taxpayers of the severe penalties for non-compliance.