HM Revenue and Customs (HMRC) has issued a critical alert for all self-employed individuals who may be impacted by changes to income tax. These alterations are linked to the Making Tax Digital for Income Tax initiative, which must be adopted by all self-employed workers earning income from self-employment, property, or both, and have a qualifying income exceeding £30,000.
It is important to note that qualifying income refers to the total gross income a worker receives in a tax year from both self-employment and property. At present, this service is not mandatory if a self-employed person’s qualifying income is £30,000 or less. However, upcoming changes will raise this threshold by £20,000.
As of April 6, 2026, the Making Tax Digital for Income Tax will only be obligatory if a self-employed individual’s qualifying income exceeds £50,000 in the 2024 to 2025 tax year.
From the same date, it will also become compulsory for those who meet the eligibility criteria. Additionally, the government intends to make the service mandatory for partnerships, although a timeline for this implementation has yet to be established.
Those unaffected by the change post-April 6, 2026, include sole traders or landlords who have not yet submitted their first Self Assessment tax return. However, they can opt to sign up voluntarily at any time should they choose to do so.
What if my income exceeds £50,000?
Upon submitting a Self Assessment tax return for the 2024/25 tax year by January 31, 2026, HMRC will scrutinise your return to verify that your qualifying income surpasses £50,000. If this is the case, you’ll receive a letter from the department confirming this and instructing you to start utilising Making Tax Digital for Income Tax.
If you employ an agent to handle your taxes, they can undertake this task on your behalf. Following receipt of this letter, either you or your agent will need to source software compatible with Making Tax Digital for Income Tax and authorise it. Subsequently, either you or your agent will have to register for the service.
Exceptions to Making Tax Digital for Income Tax
Certain individuals may be automatically exempted from using Making Tax Digital for Income Tax. These include:
- non-resident company
- person that does not have a National Insurance number — this only applies for a tax year where you do not have a National Insurance number on 31 January before the start of that tax year
- personal representative of someone who has died
- trustee, including a charitable trustee or a trustee of non-registered pension schemes
- Lloyd’s member, in relation to your underwriting business
Otherwise, you could apply for exemption if you believe it is not practical to use the software to keep digital records or are a practising member of a religious society in which the beliefs are incompativle with using electronic communications or keeping electronic records. Full details of the exemptions to Making Tax Digital for Income Tax can be found on GOV.UK here.
