HMRC has launched a primary communication drive to raise awareness of Making Tax Digital for Income Tax (MTD ITSA), sending letters to hundreds of thousands of taxpayers with income over £50,000.
These individuals, including landlords, sole traders and self-employed earners, will be part of the first group legally required to keep digital records and submit quarterly updates from April 2026.
Under the phased rollout, anyone with a qualifying income of more than £50,000 from self-employment or property will need to comply with MTD ITSA from the start of the 2026/27 tax year.
Those earning between £30,000 and £50,000 will be brought into the regime from April 2027.
General partnerships are scheduled to join at a later stage, although no firm date has been set.
HMRC expects that nearly 900,000 taxpayers will fall into the first wave.
To manage this transition, the department has begun sending targeted letters to individuals who submitted their 2024/25 tax returns early, before August of this year. The letters explain that, based on the income recorded in their latest return, they will be required to comply with MTD ITSA from April 2026. Each letter also includes a QR code linking to HMRC’s guidance and preparation checklist.
For advisers, HMRC has issued its own warning; the department has told accountants to expect an increase in client enquiries over the next month as letters land. In its latest agent update, HMRC advised firms to begin reviewing their 2024/25 clients to identify those who will fall under the rules, noting that early preparation will help manage workloads during the transition.
Preparing for digital reporting
MTD ITSA represents the most significant reform of individual tax reporting since the introduction of self-assessment in 1997. Affected taxpayers must keep digital records of all income and expenses from self-employment and property. They will be required to submit quarterly updates to HMRC, with figures separated by income type, followed by an end-of-period statement and final declaration after the tax year ends. Tax will still be due by 31 January, but the reporting process will be substantially more frequent.
Unlike Making Tax Digital for VAT, HMRC will not provide free functional software for Income Tax. Taxpayers must either purchase commercial MTD-compatible software or work with an accountant who has the necessary tools to meet the requirements. A stripped-back free option from Sage will be available for straightforward affairs, but most individuals are expected to need paid solutions. This has raised concerns among small landlords and sole traders about the added cost of compliance.
Key dates taxpayers need to know
Although the rules begin in April 2026, the first quarterly update is not due until August 07, 2026, covering the period from 06 April to 05 July. Digital record-keeping, however, must begin immediately from the start of the tax year. Quarterly submissions will then follow every three months, in addition to the final end-of-year reporting.
This latest communication campaign is far more targeted than earlier activity. HMRC wrote to around 864,000 taxpayers earlier this year to alert them to the upcoming changes, but the new letters are personalised and based on actual 2024/25 tax return data. Officials say this approach is designed to ensure taxpayers have adequate time to prepare and adopt software well before the rules take effect.
MTD ITSA represents a major structural shift in tax administration. HMRC has confirmed that penalties will be applied for non-compliance, including failure to maintain proper digital records or submit quarterly updates on time. Although some professional bodies have called for a “soft landing”, HMRC has not indicated that it plans to take a lenient approach in the first year.
With the countdown now firmly underway, both taxpayers and advisers face a significant period of adjustment; early preparation, software planning and clear communication will be essential to avoid disruption when the new regime begins.
We can help
If you’ve received a letter from HMRC – or simply want to get ahead with MTD ITSA – please contact us.
