Major HMRC change from April 6 affects three groups | Personal Finance | Finance
Tax returns are changing (Image: Andrzej Rostek via Getty Images)
Landlords, sole traders and self-employed individuals are being encouraged to brace themselves for the “death of the traditional income tax return” this April. Accountancy and business advisory firm Azets has issued a warning that those earning more than £50,000 annually will need to adhere to the new Making Tax Digital (MTD) scheme from next month.
As part of the HMRC overhaul, eligible individuals and businesses will be obliged to maintain digital records, utilise MTD-compatible software, and submit quarterly updates along with a final declaration. This significant revamp – the most substantial since the implementation of self-assessment in 1997 – aims to bring the tax system closer to real-time.
It is set to impact 864,000 landlords and individuals across the country from April 6, 2026, with projections suggesting this figure could escalate to 2.9 million within three years.
Fraser Campbell, UK head of ABAS at Azets, which boasts offices in Plymouth, Bristol, Gloucester, Truro and South Molton, near Barnstaple in Devon, said: “MTD truly signifies the death of the traditional income tax return. It represents a major change with the introduction of digital reporting obligations for hundreds of thousands of landlords, sole traders and the self-employed from April onwards.
“It is crucial that they put plans in place to deal with this shift to ensure a smooth and compliant transition to the new regime as the April deadline is fast approaching. While this will mean changes in processes and software that is compliant with MTD, the switch will bring advantages too with access to near real-time digital information about taxes for thousands of people for the first time.
Fraser Campbell, UK head of ABAS at Azet (Image: Azet/Deep South Media)
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“It will place accurate financial information into the hands of you or your tax adviser more regularly to assist with visibility over business performance, forward tax planning and forecasting as well as a smoother year-end process.”
Azets revealed it became the first accountancy practice in Britain to submit an MTD quarterly return for a landlord last June when it collaborated with HMRC and the international small business platform Xero during a trial phase of the new framework ahead of a public beta programme.
The firm encouraged landlords, sole traders and the self-employed to get ready for MTD by reviewing their qualifying income immediately to determine whether they fall within the new reporting requirements.
Many workers will be affected (Image: PaulMaguire via Getty Images)
It also advised keeping in mind that the threshold will decrease in following years, so begin preparations if you’re likely to qualify for MTD in 2027 or 2028.
Additionally, verify that your – or your accountant’s – software has HMRC approval to ensure it works with MTD. Begin utilising software immediately for a seamless transition in April.
HMRC Making Tax Digital explained
Azets highlighted that MTD exemptions may be available – verify this through the HMRC website or consult professional guidance. According to HMRC, almost two million VAT-registered businesses have been obliged to utilise MTD software for record-keeping and submissions since April 2022.
Property landlords, sole traders and self-employed individuals with qualifying income exceeding £50,000 for the 2024-25 tax year will come within scope for MTD from April 6.
Through a staged implementation, from April 2027 those earning a qualifying income of £30,000 will come within scope. From April 2028, those with qualifying income above £20,000 will be incorporated.
