Over two million Brits face being forced to file more than 10 financial updates a year under new Making Tax Digital (MTD) rules. In two months, MTD will go live – a new way for sole traders and landlords to report income and expenses to HMRC. The new system is a UK Government initiative aimed at modernising the tax system by requiring businesses and landlords to keep digital records and submit quarterly tax updates to HMRC using compatible software.

Colette Mason, Author & AI Consultant at London-based Clever Clogs AI, said: “The numbers are staggering. HMRC estimates 780,000 people will be drawn in from April 2026, with a further 970,000 from April 2027. By 2028, when the threshold drops to £20,000, over one million more will be added, pushing the total well past two million.”

She adds: “The government has also openly said it wants to eventually pull in the four million sole traders and landlords earning below £20,000.

“That’s people earning less than minimum wage being forced into quarterly digital reporting. For someone with a small side-hustle business and, say, a rental property, that’s at least eight filings a year.

“Add more income sources and yes, you could hit double figures. The real question is proportionality: what does HMRC gain from quarterly chasing someone earning less than a full time worker on minimum wage?

“The compliance cost on the nation’s mood, the software and admin overhead for people already stretched thin will easily dwarf any tax recovered.”

The change replaces manual, annual, or paper-based reporting with a digital, real-time process, with MTD for VAT already mandatory and MTD for Income Tax (MTD for ITSA) rolling out from April 2026.

For individuals, MTD for ITSA will be introduced in two phases: from April 2026, for those with qualifying income over £50,000, and from April 2027, for those with qualifying income over £30,000.

Experts have warned that it could mean the number of financial updates needed to be sent by small business owners is over 10.

Someone who is a self-employed plumber will have to file five times a year, four quarterly updates plus the tax return, and if they are a landlord too then that doubles the amount of financial updates needed to be filed. And that doesn’t even take into account VAT returns.

Taryn Lee Johnston, Owner at Lincoln-based The FCM Group, said it feels like yet another hit for small businesses. She says that for many self-employed people and small business owners, this feels like yet another administrative weight added to an already heavy load.

She says: “Quarterly reporting under Making Tax Digital was sold as a way to modernise the system. The concern is not just frequency, but cost, time and mental bandwidth. Many small business owners do not have in-house finance teams.”

She adds that this could see them needing to pay for accountants or spending hours on compliance rather than growing their business.

Taryn says: “At a time when the UK says it wants to encourage entrepreneurship and economic growth, increasing administrative burden sends a conflicting message.”

Gwion Thomas, founder of LITT, the sole trader and freelancer accounting app, warned those affected to not leave it to the last minute.

He says Making Tax Digital represents a landmark shift in UK tax, moving millions of sole traders from annual, manual filings to digital record-keeping and quarterly reporting.

He adds: “While HMRC’s goal of improving accuracy is positive, the priority now is preparation and I would advise people to get ready now before it’s too late. Don’t leave it to a last-minute scramble and understand what you need way ahead of April’s rollout.”

Steven Greenall, Mortgage and Protection Advisor at Rayleigh-based Protect & Lend, said preparation is key.

He said: “There is no doubt Making Tax Digital will feel onerous at first, especially for sole traders and landlords used to filing once a year. The shift to quarterly reporting and digital systems will bring a learning curve and possibly extra costs.”

He adds that those who prepare early and put the right systems in place will find the transition more manageable.