UK Taxpayers Earning Over £50,000 Must Use New Digital System from April 2026

Starting April 6, 2026, UK taxpayers earning over £50,000 will need to submit tax updates every three months instead of once a year.
By Newsroom | Finance, UK |

HM Revenue and Customs (HMRC) has issued a significant warning to individuals in the UK earning £50,000 or more, announcing a substantial shift in tax filing procedures. Starting April 6, 2026, a new system, Making Tax Digital (MTD) for Income Tax, will require eligible self-employed individuals and landlords to submit income and expense updates quarterly, moving away from the current annual self-assessment. This change impacts an estimated 780,000 people initially, with plans to expand to those earning £30,000 by April 2027.

New Digital Tax Rules for Higher Earners

HMRC is informing individuals whose gross earnings from self-employment or property exceed £50,000 about an upcoming change to how they report their taxes. The transition to Making Tax Digital (MTD) for Income Tax means these taxpayers will need to:

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  • Maintain digital records of their income and expenses.

  • Use approved software to submit these records to HMRC.

  • File updates every three months, rather than once a year.

This initiative aims to modernize the tax system, bringing it closer to real-time reporting and helping taxpayers manage their financial obligations more proactively. The changes represent the most significant alteration to the self-assessment regime since its inception in 1997.

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Scope and Timeline of MTD for Income Tax

The implementation of MTD for Income Tax is set to occur in phases:

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  • April 6, 2026: The new system begins for individuals with gross earnings from self-employment and property exceeding £50,000.

  • April 2027: The threshold for mandatory digital reporting will lower to £30,000, bringing an additional group of taxpayers under the MTD framework.

An estimated 780,000 individuals are expected to be part of the initial rollout in April 2026, with the subsequent phase impacting an additional 970,000 people. The income threshold refers to gross earnings before any tax allowances or expenses are deducted.

Rationale Behind the Digital Shift

HMRC states that the move to digital tax filing is intended to achieve several objectives:

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  • Improved Efficiency: Digital record-keeping and quarterly submissions are expected to streamline tax administration.

  • Real-Time Reporting: The system aims to provide a more current view of taxpayers' financial positions.

  • Reduced Errors: By using compatible software and frequent updates, the incidence of calculation mistakes is anticipated to decrease.

  • Financial Management: Spreading the reporting workload throughout the year is intended to help individuals stay on top of their tax affairs and avoid last-minute rushes and potential penalties.

Officials suggest that businesses that participated in the MTD for VAT pilot program were better prepared for the shift to quarterly reporting, implying a similar benefit for income tax filers.

Key Stakeholders and Their Views

  • HMRC: The government agency is spearheading the MTD for Income Tax initiative, viewing it as a crucial step in modernizing the tax system and fostering economic growth. Craig Ogilvie, HMRC’s Director of Making Tax Digital, has described it as the "most significant change to the Self Assessment regime since its introduction in 1997."

  • The ICAEW (Institute of Chartered Accountants in England and Wales): This professional body has cautioned that some taxpayers affected by the new rules might not receive their notification letters until April, leaving them with limited time to prepare for digital record-keeping and quarterly filings.

  • Government Officials: The initiative is framed as part of a broader "decade of national renewal" and a "Plan for Change," aimed at removing barriers to growth. Exchequer Secretary to the Treasury, James Murray (Labour Party MP), has emphasized its role in transforming the UK's tax system to support economic expansion.

Evidence and Documentation

  • HMRC Communications: Announcements and reminders have been posted on platforms like X (formerly Twitter).

  • Government Policy Documents: The MTD for Income Tax initiative is part of the government's broader tax strategy and economic plans.

  • Software Requirements: Taxpayers will need to use "MTD-compatible software" for submissions, indicating the development and approval of specific digital tools.

  • Official Figures: Estimates for the number of affected individuals (780,000 initially, with 970,000 more by 2027) are provided.

Expert Analysis and Observations

The transition to MTD for Income Tax signifies a fundamental departure from the established annual self-assessment system that has been in place since 1997. This overhaul demands a significant adaptation from taxpayers, particularly regarding the adoption of new digital tools and more frequent reporting cycles. The ICAEW's warning highlights a potential logistical challenge, where taxpayers may receive notification close to the commencement date, potentially complicating their preparedness for digital record-keeping and quarterly submissions. The government's emphasis on economic growth through tax system modernization suggests a strategic alignment between tax administration and broader economic policy objectives.

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Conclusion and Next Steps

HMRC's implementation of Making Tax Digital for Income Tax represents a substantial change for self-employed individuals and landlords earning over £50,000. The mandate for quarterly digital updates and the use of approved software, commencing April 6, 2026, requires proactive engagement from affected taxpayers.

  • Actionable Steps for Taxpayers: Individuals approaching or exceeding the £50,000 gross earnings threshold should investigate MTD-compatible software options and begin adapting their record-keeping practices to digital formats. Staying informed about HMRC communications and any guidance provided by professional accounting bodies will be crucial.

  • Governmental Oversight: HMRC will monitor the rollout and compliance rates, with further expansion planned for lower income thresholds.

  • Future Implications: The success of this digital transition could influence future tax system reforms and the broader adoption of digital services by government agencies.

The ICAEW's advice underscores the importance of timely communication from HMRC to ensure a smoother transition for those impacted by these new regulations.

Sources Used

Frequently Asked Questions

Q: What is the new tax rule from HMRC for people earning over £50,000?
From April 6, 2026, people in the UK earning £50,000 or more from self-employment or property must use a new system called Making Tax Digital (MTD) for Income Tax. This means they will need to send income and expense updates to HMRC every three months, instead of once a year.
Q: Who is affected by the new Making Tax Digital for Income Tax rules?
The new rules will first affect around 780,000 self-employed people and landlords in the UK whose gross earnings from these sources are over £50,000. This will change how they report their taxes from April 6, 2026.
Q: Why is HMRC changing the tax filing system to digital?
HMRC wants to make the tax system more modern and efficient. The goal is to help taxpayers keep better track of their finances throughout the year and reduce mistakes by using digital records and more frequent updates.
Q: When will the digital tax filing rules apply to people earning less?
After the first group starts in April 2026, HMRC plans to lower the requirement to those earning £30,000 or more by April 2027. This will bring more people into the digital tax reporting system.
Q: What do people need to do to follow the new digital tax rules?
People affected need to keep digital records of their income and costs and use special software approved by HMRC to send these updates quarterly. They should start looking into MTD-compatible software and changing how they keep their financial records.