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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 in 2026, as awareness of the “biggest change in a generation” remains low, advisers warned.
From April 6, anyone with self-employed or rental income of more than £50,000 in 2024-25 will be required to submit quarterly updates through software on their combined income, costs and profit.
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 about 850,000 people in 2026-27, according to the Chartered Institute of Taxation.
Overall, at least 3mn people will be affected once the rollout is complete, after the income threshold falls in April 2027 to £30,000 and drops again to £20,000 in April 2028.
“In general, there’s a real lack of awareness of MTD obligations,” said Simon Armstrong, outsourcing director at accountancy and business advisory firm Menzies. “Many business owners already dealing with economic pressures and recent Budget changes have not prioritised understanding or prepared for MTD compliance.”
Nikita Cooper, partner at Price Bailey, an accountancy firm, also said many of those affected by the changes were “unsure of what this means and practically how and what they need to do”.
The lack of awareness and clarity about the compliance requirements meant hundreds of thousands of people would be “scrambling around after January 31 to sign up 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 be required 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 that affected individuals take to be ready for the changes. These include registering for an MTD online gateway; separating 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 will have to choose from a government-approved list of software providers. Some offer a free service, but tax advisers believe these will only be suitable for those with the most basic tax affairs and expect that many people will have to pay for the software — a condition some may not be aware of.
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 awareness among the public, they were concerned about HMRC’s own readiness for the changes.
Jack McConnel, investigator at TaxWatch, a think-tank, described the measures as “the biggest change in a generation for how nearly 3mn people will do their taxes”. But he added: “While MTD is meant to simplify and digitise 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 in development.
“People in the industry have told us that testing might happen with real taxpayer data, raising privacy issues and the potential for calculation errors,” he said. HMRC has also told TaxWatch that “less than 20 per cent” of the MTD APIs do not remember changes previously made, which means they cannot be fully tested yet, with just four months to go before the new system becomes mandatory, McConnel added.
In a sign that the government accepts there are likely to be teething problems as the system rolls out, HMRC has waived penalties for late submissions of quarterly reports during the 2026-27 tax year.
HMRC said: “We’ve worked extensively with customers, representative bodies and software developers to ensure Making Tax Digital works for small businesses and landlords, helping them prepare for the change.
“It will ensure that more businesses get their tax right, avoiding the worry, cost and burden of extra work when things go wrong, helping to close the tax gap. It will also give customers a better view of the health of their business.”