With the first phase of Making Tax Digital for Income Tax fast approaching, HM Revenue & Customs has begun writing to taxpayers it believes may be affected by the upcoming changes.
These letters are part of HMRC’s preparations for the introduction of Making Tax Digital for Income Tax (MTD IT), which will fundamentally change how many sole traders and landlords report their income and expenses.
With the first mandatory sign-ups beginning in April 2026, it’s important to understand whether the changes apply to you and what steps you may need to take.
In this article, we’ll cover:
- Why HMRC Is Sending Making Tax Digital Letters
- Who Must Join Making Tax Digital for Income Tax First
- Future Expansion Of MTD For Income Tax
- How Making Tax Digital Will Change Tax Reporting
- Choosing The Right Software For MTD
- What To Do If You Receive A HMRC Letter
Why HMRC Is Sending Making Tax Digital Letters
As the rollout of Making Tax Digital for Income Tax approaches, HMRC has begun contacting taxpayers it believes may fall within the first group required to comply.
These letters are being sent to individuals whose 2024–25 Self Assessment tax return suggests they may have qualifying income above £50,000 from self-employment or property.
The aim is to give taxpayers early notice so they can prepare for the changes before the rules become mandatory in April 2026.
However, receiving a letter does not necessarily mean you must join immediately. It simply means HMRC believes you may fall within the scope of the new system and should review your income to confirm whether the rules apply.
Who Must Join Making Tax Digital For Income Tax First
From April 2026, the first group required to join MTD for Income Tax will be sole traders and landlords with qualifying income above £50,000.
Qualifying income refers to the combined income from trading and property before expenses are deducted. For example, this may include:
- Income from self-employment
- Rental income from property
It’s important to note that not all income counts towards this threshold.
Income from the following does not fall within the scope of MTD for Income Tax:
- Trading through a limited company
- Income earned through a partnership
Only income from sole trader activities and property letting should be considered when calculating qualifying income.
Future Expansion Of MTD For Income Tax
The rollout of MTD for Income Tax will take place gradually over the next few years.
The planned timeline currently looks like this:
- April 2026: Individuals with a qualifying income over £50,000
- April 2027: Threshold expands to those with income over £30,000
- April 2028: Threshold reduces further to £20,000
This means that over time, most people who earn income from self-employment or property will eventually be required to follow the new digital reporting rules.
How Making Tax Digital Will Change Tax Reporting
Making Tax Digital represents a major change to the traditional Self Assessment system.
Instead of submitting one annual tax return, taxpayers will be required to maintain digital records and submit updates throughout the year.
Under the new system, individuals will need to:
- Keep digital records of income and expenses using compatible software, apps, or spreadsheets
- Submit quarterly updates to HMRC summarising income and expenses
- Send a final annual declaration confirming taxable profit for the year
These quarterly submissions will give HMRC a more up-to-date picture of a taxpayer’s income, gradually replacing the traditional once-a-year Self Assessment return.
Choosing The Right Software For MTD
One key aspect of the new system is that HMRC will not provide its own software platform for Making Tax Digital submissions.
Instead, taxpayers must use approved third-party software that connects directly to HMRC’s systems.
Many accounting platforms already support Making Tax Digital, including solutions designed specifically for small businesses, sole traders, and landlords. Choosing the right system will make keeping digital records and submitting quarterly updates much easier.
At Digital Tax Matters, we work with many of the leading cloud accounting platforms and can help you find the right software solution for your situation.
What To Do If You Receive A HMRC Letter
If you receive a Making Tax Digital for Income Tax letter from HMRC, the most important step is to review your income carefully.
You should confirm:
- Your qualifying income for the 2024–25 tax year
- Whether that income exceeds the £50,000 threshold
- Whether you will need to join the MTD system from April 2026
Even if you haven’t received a letter yet, you may still be required to join if your qualifying income exceeds the threshold.
Checking your position early allows you to prepare in advance rather than rushing to comply close to the deadline.
How Digital Tax Matters Can Help
Making Tax Digital for Income Tax is one of the biggest changes to the UK tax reporting system in recent years. While the new rules are designed to modernise the system, they can also create uncertainty for sole traders and landlords who are used to the traditional Self Assessment process.
At Digital Tax Matters, our experienced accountants in Bedford specialise in digital accounting and Making Tax Digital compliance. We have already successfully filed returns under HMRC’s MTD beta programme, meaning our systems are tested, and our team is fully prepared to guide clients through the transition.
If you’ve received a letter from HMRC about Making Tax Digital for Income Tax, we can help you:
- Calculate your qualifying income
- Confirm whether you need to join MTD and when
- Choose the right accounting software
- Ensure you meet your new reporting obligations
If you believe your qualifying income for 2024–25 may exceed £50,000, it’s best not to wait for HMRC to contact you. Get in touch with Digital Tax Matters today, and we’ll help you prepare for Making Tax Digital in plenty of time.