HMRC has given a warning to 864,000 taxpayers following the introduction of a new tax system. Making Tax Digital is a fresh approach to digitally report income tax, which became compulsory in April 2026 for sole traders and landlords with income exceeding £50,000.
Under this new system, taxpayers must provide quarterly updates on their income and expenses, with the initial deadline set for August 7. These updates must be submitted using HMRC-recognized software. After each update, an estimated tax bill will be displayed, and a tax return must still be filed by the usual deadline of January 31.
Failure to pay any owed tax by January 31 will result in fines based on a points system. Each missed submission earns one point, with a £200 fine imposed upon accumulating four points from quarterly submissions.
Penalty points expire after 24 months of compliance. During the 12-month transitional grace period for the first year of Making Tax Digital, no penalty points will be issued for late quarterly updates.
Currently, under self-assessment rules, a £100 immediate fine is levied for late submission of the self-assessment tax return, due by January 31.
The expansion of Making Tax Digital will encompass individuals earning over £30,000 starting April 2027 and those earning over £20,000 from April 2028. VAT-registered businesses have been mandated to utilize Making Tax Digital for VAT purposes since 2022.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, emphasized the importance of this tax system transformation, encouraging sole traders and landlords to start sending their first quarterly update promptly. Those not yet enrolled can still sign up by visiting GOV.UK and searching ‘Making Tax Digital for Income Tax’.
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