Hundreds of thousands of self-employed workers and landlords across the UK are facing the most substantial overhaul of the tax system in a generation. From 6 April 2025, the government's Making Tax Digital (MTD) for Income Tax scheme becomes mandatory for individuals with business or property income over £50,000.
What is Changing for Self-Assessment?
The new rules mark a definitive shift from the annual self-assessment tax return. Under MTD, affected taxpayers – primarily sole traders and landlords – will be required to maintain digital records of their income and expenses using compatible software. Instead of a single yearly submission, they must send quarterly updates to HM Revenue and Customs, followed by a final end-of-period statement.
Officials state that this move to digital record-keeping will save time previously lost to gathering paperwork and reduce errors. It also aims to bring the tax system closer to real-time reporting, helping individuals better manage their cash flow and avoid last-minute scrambles to meet the January deadline.
Government and HMRC Urge Early Preparation
With the April deadline now just over four months away, HMRC is actively encouraging eligible taxpayers to join a live testing programme. Craig Ogilvie, HMRC’s director of MTD, described the change as "the most significant change to the self-assessment regime since its introduction in 1997."
He emphasised that signing up for testing allows people to familiarise themselves with the new digital process and access dedicated support from HMRC's customer service team before the scheme becomes compulsory. The Labour government has framed the initiative as a key component of its economic strategy.
James Murray MP, Exchequer Secretary to the Treasury, commented: “MTD for income tax is an essential part of our plan to transform the UK’s tax system into one that supports economic growth. By modernising how people manage their tax, we’re helping businesses work more efficiently and productively while ensuring everyone pays their fair share.”
Key Actions and Next Steps
For those with income above the £50,000 threshold, the immediate steps are clear:
- Evaluate eligibility: Confirm if your business or property income exceeds £50,000.
- Explore software: Research and select HMRC-recognised MTD-compatible software.
- Sign up for testing: Join HMRC's pilot programme to gain experience and support ahead of the mandate.
The government asserts that spreading the administrative workload across the year will free up valuable time for business owners to focus on their core activities. This reform is positioned as a critical step in modernising the UK's tax infrastructure for the digital age.
