The biggest overhaul of self‑assessment in years has come into force, requiring millions of freelancers and landlords to change how they report earnings to HM Revenue and Customs (HMRC).
Initial setup expenses are estimated at £280–£350 per business, with ongoing software fees of £110–£115 a year.
Making Tax Digital for Income Tax Self Assessment took effect on April 6 2026, bringing in new rules for anyone earning more than £50,000 from self‑employment or rental income.
Under the system, affected taxpayers must keep digital records and submit quarterly updates to HMRC, replacing the traditional once‑a‑year return.
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Four in‑year submissions are now required, followed by a final declaration each January.
Labour says the reforms will modernise the tax system and help reduce the tax gap.
Taxpayers must file summaries of income and expenses every quarter using compatible software, with deadlines falling on the seventh day of the month after each reporting period.
No tax is calculated or paid at this stage, the updates are for reporting only, and the usual January 31 payment deadline remains in place.
New HMRC rules force freelancers to file quarterly tax updates
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“Filing of taxes used to be a free service completed annually,” said Manase Mtopa, head of UK at Hnry.
“Introducing the need to use software quarterly will invariably introduce costs to the taxpayer.”
A 2025 survey by the Administrative Burdens Advisory Board found nearly three‑quarters of small businesses and agents expected the reforms to increase costs.
Penalties will apply for missed deadlines under a points‑based system. Each late submission earns one point, and four points trigger a £200 fine.
Points expire after 24 months if compliance improves.
Brad Wilkinson, of Ascendis, said the system gives taxpayers opportunities to correct mistakes but warned repeated failures could lead to penalties.
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The threshold for inclusion will fall in stages
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From April 2027, those earning more than £30,000 must comply, dropping to £20,000 from April 2028.
Taxpayers can choose from a range of compatible software, from full accounting platforms to “bridging” tools that link spreadsheets to HMRC systems.
Arjun Kumar, founder of Taxd, said: “There’s a misconception that you have to use expensive, fully integrated software.
"You can still use a simple spreadsheet for your digital records.”
Labour confirmed exemptions will be available for individuals unable to use digital systems, with applications assessed by HMRC.