Thousands of will be caught out by major being introduced by next year, an expert has warned. Andy Wood, international tax expert at said the changes affect how workers report their income to HRMC.
He said the changes will affect approximately 780,000 people in its first wave, with another 970,000 to follow from April 2027, and further expansion in 2028. Wood said that from April 6, 2026, those earning over £50,000 from self-employment or property income will need to comply with Making Tax Digital (MTD) for Income Tax - a significant shift towards digital record-keeping and quarterly submissions. The first group affected includes sole traders and landlords with gross income over £50,000. Those earning between £30,000 and £50,000 will follow in April 2027, with further expansion to £20,000+ earners from 2028.
He said: "The income threshold is based on gross income, not profits-which means even those making modest earnings after expenses could still be caught by the new rules."
"Many people assume these thresholds apply to their net income after tax relief, but that's not the case," Wood warned. "It's based on total income before deductions, so the scope is broader than some might expect."
"This is the biggest change to personal tax reporting since Self Assessment was introduced," said. "While MTD aims to streamline the process, it also places a much greater administrative burden on individuals who may not be set up for quarterly reporting."
What is 'Making Tax Digital' for Income Tax?
The system will require eligible individuals to:
Wood said: "It's not just about moving tax online - it's about shifting to real-time reporting. "That means landlords and sole traders will need to adjust how they manage their finances throughout the year, not just at tax return time."
Why is this happening?
According to , the change is designed to improve accuracy, reduce errors, and save time. They believe the digital transition will help taxpayers stay on top of their obligations while offering a clearer picture of their tax position year-round.
But experts caution that not all taxpayers will find the transition easy.
"There are benefits to this system - especially for those already using cloud accounting software," said Wood. "But for many smaller landlords or sole traders, this could mean new costs, new software, and a steep learning curve. Planning ahead is crucial."
Should I sign up early?
is currently encouraging early adopters to join the MTD testing programme, giving them time to familiarise themselves with the new system and access dedicated support.
"Signing up early is wise," said Wood. "It allows you to test-drive the system, work out any teething issues, and avoid a last-minute scramble in 2026. Taxpayers who prepare in advance will be in a far better position when the deadline hits."
Will this reduce errors and save time?
MTD for VAT, which was rolled out previously, has reportedly helped over two million businesses reduce errors and increase efficiency. A 2021 report found that 69% of businesses saw at least one benefit, with 67% reporting fewer record-keeping mistakes.
"There's definitely potential for long-term savings and greater accuracy," said Wood. "But the key to unlocking those benefits lies in how well taxpayers adapt to the new systems. A proactive approach will be vital."
"Making Tax Digital is coming - and for many, it's coming sooner than they realise," he said. "Now is the time to speak with an accountant or tax adviser, get the right software in place, and understand how this affects your personal circumstances. The cost of doing nothing could be high, both financially and in terms of compliance."
