Every accountant and bookkeeper in the land must be aware of the new Making Tax Digital for Income Tax rules starting from April 2026. Whilst this is a major change for the profession, the key question is how many taxpayers will it actually impact?
The only way to get the answer to this was to ask HMRC, via a Freedom of Information Request. The results from that request were very interesting.
14% of Self Employed impacted from April 2026
Of the 4.7 million taxpayers who completed a self employment tax return for 2023/ 2024, surprisingly just 14% of them will be impacted by the new regime from April 2026.
Of these, 189,400 (4% of the total self-employed) have a turnover exceeding £90,000 and therefore are already required to do quarterly reporting for VAT purposes. Assuming they have, or will, align their VAT quarter end dates with the Making Tax Digital for Income Tax filing dates, there should be little additional work needed aside from completing the MTD filing, provided that their current software is capable of doing so.
So the initial impact of the new regime will be on just 10% of self employed tax payers.
Based on current figures, a further 840,900 (18%) of taxpayers could join Making Tax Digital for Income Tax from April 2027 and a further 680,000 (14.5%) from April 2028.
In total that gives about 47% of current self employed taxpayers who will eventually be filing quarterly tax returns plus the Final Submission.
Of course the numbers could be higher if the 2.3 million self employed tax payers who have income under £20,000 also have property income which, when combined, brings them into the new regime. The statistics, for both self employed and property owners, are never going to be precise but should give a reasonable idea of the impact and timing thereof.
Property Income and Landlords
Of the 2.9 million people who have property income just 4% (124,700) of them will need to follow the new Making Tax Digital for Income Tax Rules from April 2026 with a further 6.7% (194,600) joining the new system from April 2027 and a further 10% (285,700) from April 2028. Overall only 20% of landlords and property owners with rental income will need to adhere to the new rules.
Tax Return Complexity
Whilst the new rules may bring challenges and opportunities, one thing that is certain is that the income tax return landscape is getting a whole lot more complex. On the face of it the rules are reasonably straight forward except where a tax payer has both self employed as well as property income. The method of filing (old system or MTD) will depend on the total income from both sources.
In a system of self assessment (the clue is in the title) working out which system of filing needs to be used really shouldn’t be that difficult and something that a general tax payer can easily understand.
It’s perplexing as to why the direction of travel from HMRC isn’t towards Making Tax Digital for Income Tax for all especially given the vast financial investment that has been made in the new systems.
If we remember that one of the main objective for HMRC starting this project over 10 years ago was to close the tax gap, being the amount of tax which isn’t collected by HMRC, then surely it makes sense to harmonise the systems of tax return filing?
I’m sure accountants everywhere are looking forward to explaining the application of the new regime to clients.
Tips for Introducing Making Tax Digital in your Practice
So it would seem that the new rules aren’t going to hit too many people from April 2026. Obviously as time marches on more will come into the new regime. So it’s still worth preparing for changes within your Practice but positioning the changes inline with the number of clients that may be impacted.
Here’s some tips to help with the changes needed …..
- Assess how many of your clients are impacted by the changes – the number is likely to be quite small. Then quantify how many of these are not already doing quarterly bookkeeping and filing for VAT returns. This should help you to focus your mind as to how important the new Making Tax Digital for Income Tax regime is within your Practice and therefore how much time you should be devoting to it. Top tip – you should know the clients who would have received a letter from HMRC because you have filed their tax returns. Contact them to check if they’ve had a letter rather than waiting for them to contact you!
- Only sign up for a pilot if you have a large number of clients impacted by the new rules. Otherwise wait until the issues are ironed out, the software is ready and things are good to go. Most clients will not thank you for signing them up too early and creating additional or unnecessary work for them.
- Communicating to clients impacted by the new regime is important making sure that you are communicating to clients in the way that they want to be communicated with whether that be a phone call, email, text, WhatsApp message or a face-to-face meeting. Your clients will be busy and new tax rules are likely to be the last thing on their minds. Swap general, regular and generic communications for targeted and focused ones to get better results.
- To help with the bookkeeping then suggest to clients, who do not already have one, that opening a separate business bank account will be essential to ensure timely adherence to the new rules. Where clients do not have an accounting system sign posting them to accounts such as Starling, Monzo, Tide or Mettle will nail the separation of business and personal transactions as well as built in bookkeeping inherent in the banking Apps
- Check if your software is ready and the price is published – our extensive research of the Making Tax Digital for Income Tax software marketplace suggests that many do not have their final solution available yet, especially for the Final Submission. Nor have they released the pricing although the software suppliers seem to want accountants to buy blocks of licences in advance! Perhaps delay your software selection decision until Q1 2026, after you’ve got the 2024 / 2025 self assessments out of the way
- Decide on how you will be handling the 2025 / 2026 self assessments. There is obviously an overlap between the old system return not being due to the 31st January 2027 and the new regime starting from the first quarter reporting deadline of 7 August 2026. Clients need to understand this and you need to decide how you will run the two systems alongside each other.
- Where possible, adopt the simple 3 line reporting approach avoiding the cost analysis paralysis trap of making sure all costs are allocated to the correct cost heading. The only split of importance for costs is between P&L or Balance Sheet items and of course disallowable costs
- Again, where possible, elect for calendar quarters as these dates will be more easy to remember for clients
- For VAT registered clients it’s worth checking that the VAT quarters align to the MTD quarters. This will certainly make the job a bit easier.
- Do it properly but avoid job creation. There has been much talk about the completeness and accuracy of what can be filed with some suggesting that anything can be filed quarterly with the final submission wrapping up the true figures. Until and unless HMRC make quarterly tax payments mandatory there is certainly no incentive to make the figures right. However, the ethical rules of most if not all professional bodies prevent us from filing information that we know to be incorrect. We have a professional duty to act ethically. The ICAEW have provided some guidance on this matter saying that members should “take care not to be associated with the presentation of facts they know or believe to be incorrect or misleading, nor to assert tax positions in a tax filing which they consider to have no sustainable basis”
- Only sign up clients to the new regime if they meet the criteria. Clients are unlikely to thank you for introducing additional filing deadlines when they don’t need to!
The overriding tip is …. don’t panic. There’s still plenty of time to work with the small number of taxpayers who will be impacted by the changes in the first tranche of the new regime.
Making Tax Digital for Income Tax does change the way tax returns are filed ….. just not for as many people as perhaps we all first thought!
Full Freedom of Information Request Data from HMRC
Provided 29th May 2025 for the tax year 2023 / 2024
Self Employed
For the tax year 2023 / 2024 the number of self employed businesses completing an SA103 Self Assessment Supplementary page (both SA103S and SA103F) broken down by gross income are as follows:
| The number with gross income / turnover up to £20,000 | 2,289,300 |
| The number with gross income / turnover between £20,000 and £30,000 | 680,000 |
| The number with gross income / turnover between £30,000 and £50,000 | 840,900 |
| The number with gross income / turnover between £50,000 and £90,000 | 486,200 |
| The number with gross income / turnover over £90,000 | 189,400 |
| Nil | 207,100 |
| Rounding or error (HMRC’s numbers didn’t add up!) | 100 |
| Total number of tax payers | 4,693,000 |
Property
The number of people who completed an SA105 property self assessment supplementary page broken down by turnover is:
| Up to £20,000 | 2,104,100 |
| Between £20,000 and £30,000 | 285,700 |
| Between £30,000 and £50,000 | 194,600 |
| Between £50,000 and £90,000 | 88.700 |
| Over £90,000 | 36,000 |
| Nil | 179,800 |
| Total number of tax payers | 2,888,900 |
Notes
Of course numbers may change as late returns are added.
HMRC have provided no information as to what they mean by “Nil” so we have to draw our own conclusions with the numbers for the “Nil” category not being significant enough to skew the overall statistics.
The numbers provided by HMRC for the number of self employed returns by turnover did not add up to the total with an error of 100!