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Hundreds of thousands of landlords and self-employed people could be caught out by new rules around filing their taxes digitally by 2026, as awareness of “the biggest change in a generation” remains low, advisers have warned.
From April 6, anyone with self-employed or rental income of more than £50,000 in 2024-25 will have to submit quarterly updates via software of their combined income, expenses and income.
The changes are part of the government’s long-delayed Making Tax Digital (MTD) programme, originally announced in the 2015 Budget. The policy will affect around 850,000 people in 2026-27, according to the Chartered Institute of Taxation.
In total, at least 3 million people will be affected once the rollout is complete, after the income threshold falls in April 2027 to £30,000 and falls again to £20,000 in April 2028.
“In general, there is a real lack of knowledge of the obligations of MTD,” said Simon Armstrong, outsourcing director of accountancy and business advisory firm Menzies. “Many business owners who are already facing economic pressures and recent Budget changes do not prioritize understanding or preparation for MTD compliance.”
Nikita Cooper, partner at Price Bailey, an accountancy firm, also said many of those affected by the changes were “not sure what it means and how and what they should do”.
A lack of awareness and clarity about compliance requirements means hundreds of thousands of people will “scramble around after January 31 to register and understand what they need to do before April”, warned Claire Roberts, tax partner at accountancy firm Moore Kingston Smith.
As part of the changes, affected people will have to use software to keep their records and file quarterly summaries of their income and expenses with HM Revenue & Customs.
Price Bailey highlighted several steps it recommends affected individuals take to prepare for the changes. This includes registering for the MTD online gateway; separate a business account from your personal account, if you have not already done so; and acquiring MTD-compliant software, setting it up and integrating it with your accounts and HMRC.
Taxpayers must choose from those approved by the government list of software providers. Some offer a free service, but tax advisors believe that it is only suitable for those with the most basic tax activities and expect that many people will have to pay for the software – a condition that some may not know.
Armstrong said: “HMRC needs to significantly strengthen its public awareness efforts. Current messaging appears to oversimplify the level of change involved, particularly the investment required in software, systems and processes.”
Meanwhile, some tax experts told the Financial Times that in addition to the lack of public awareness, they are concerned about HMRC’s own readiness for the changes.
Jack McConnel, researcher at TaxWatch, a think-tank, described the measures as “the biggest change in a generation to how nearly 3 million people do their taxes”. But he added: “While MTD is intended to simplify and digitize tax, the technical readiness of HMRC’s infrastructure remains a major concern.”
McConnel warned that industry figures say many of HMRC’s digital interfaces for MTD, known as application programming interfaces (APIs), are still under development.
“People in the industry have told us that testing could happen with real taxpayer data, raising privacy issues and the potential for calculation errors,” he said. HMRC also told TaxWatch that “less than 20 per cent” of MTD APIs do not remember changes made in the past, meaning they are not yet fully tested, with just four months to go before the new system becomes mandatory, McConnel added.
In a sign the government admits there are likely to be teething problems with the system’s rollout, HMRC has waived penalties for late submission of quarterly reports in the 2026-27 tax year.
HMRC said: “We are working with customers, representative bodies and software developers to ensure that Making Tax Digital works for small businesses and landlords, helping them prepare for the change.
“This will ensure that more businesses get their taxes right, avoiding the worry, cost and burden of additional work when there are problems, helping to close the tax gap.