Imogen BennettHMRC's Making Tax Digital (MTD) mandate went live on 6 April 2026, requiring sole traders and landlords earning over £50,000 to file quarterly digital tax returns — the biggest overhaul to UK self-assessment in a generation. Millions of workers face fines if they fail to comply in the 2026-27 tax year.
What Changed on 6 April 2026
According to HMRC's official guidance, the Making Tax Digital for Income Tax (MTD ITSA) rules now require qualifying individuals to:
- Use HMRC-recognised accounting software to record all business income and expenses
- Submit quarterly digital updates to HMRC (instead of one annual return)
- File an end-of-year final declaration confirming their total income
The threshold of £50,000 in business receipts applies to the combined income from self-employment and property rental. HMRC has confirmed there will be no penalties during the 2026-27 transition year for late submissions — but the obligation to file digitally is immediate.
Two further waves are planned: the threshold drops to £30,000 in April 2027, and to £20,000 in April 2028.
Capital Gains Tax and Inheritance Tax: New Rates Hit Hard
MTD is not the only change in force from April 2026. Three significant tax hikes came into effect simultaneously:
Capital Gains Tax: The rate on Business Asset Disposal Relief (BADR) and Investors' Relief has risen from 14% to 18%. This directly affects entrepreneurs selling businesses and investors disposing of qualifying shares.
Inheritance Tax (IHT) reliefs capped: Agricultural Property Relief (APR) and Business Property Relief (BPR) are now capped at £2.5 million per individual. Assets above the cap receive only 50% relief — creating an effective 20% IHT rate on excess value. Family farms and business owners are among the hardest hit.
Plant and machinery allowances reduced: The annual investment allowance for equipment has been trimmed, reducing tax relief for small businesses investing in assets.
These changes follow the Chancellor's Autumn Budget, which reversed several longstanding reliefs. The combined impact means many self-employed professionals, landlords, and business owners face materially higher tax bills in the 2026-27 year.
Who Is Affected — and How Urgently
Sole traders with turnover above £50,000: If you run a freelance, consulting, or trade business with receipts above this threshold, you are legally required to switch to MTD-compatible software now. Spreadsheets no longer qualify.
Landlords with gross rental income above £50,000: This includes those with multiple properties. Rental income from overseas properties is also in scope.
Farming families and business owners: The IHT relief changes mean estates that previously passed to heirs with minimal tax now face potential bills of hundreds of thousands of pounds. Planning should begin immediately.
Property investors and entrepreneurs: The CGT rate increase means the timing of any disposal decision — selling a business or investment property — needs careful review.
YMYL disclaimer: Tax and financial decisions have significant legal and monetary consequences. This article provides general information only. Always seek advice from a qualified tax advisor, accountant, or financial planner before taking action.
Common Mistakes to Avoid
Waiting until the Self-Assessment deadline: MTD requires quarterly submissions. The first quarterly period for the 2026-27 tax year already began on 6 April. Missing the first update creates a backlog.
Using incompatible software: Not all accounting tools are MTD-compliant. HMRC maintains an approved software list. Free tools like spreadsheets do not qualify — penalties apply for non-compliant filing methods.
Underestimating the IHT change: Many business owners assume existing succession plans remain valid. The £2.5 million cap may have fundamentally changed the position of estates structured around APR or BPR.
How a Financial Adviser Can Help Right Now
The April 2026 changes are not just administrative — they require strategic decisions:
- MTD setup: A tax adviser can select the right software, configure quarterly reporting correctly, and ensure no quarterly period is missed
- CGT planning: If you are considering selling a business or investment, the timing and structure of the disposal now materially affects your net gain
- Estate planning: For farms and family businesses affected by the IHT relief cap, a wealth adviser can model the revised estate value and recommend structures such as trusts, lifetime gifts, or staggered asset transfers
- Pension contributions: Maximising pension contributions before the end of the tax year remains one of the few remaining reliefs to reduce a taxable estate
The complexity introduced by simultaneous changes to MTD, CGT, and IHT means that taking professional advice in April 2026 — rather than waiting until January — could save significant sums.
For many taxpayers, the April 2026 changes represent the first time their tax affairs have required active management rather than a once-a-year filing exercise. The sooner you engage with the new requirements, the more options you have — both for compliance and for minimising your tax burden through legitimate planning.
Connect with a tax adviser or financial planner on Expert Zoom to review your position before the first quarterly MTD deadline passes.
