Brits issued £350 warning over huge HMRC change | Personal Finance | Finance

The UK’s tax system is undergoing change, as businesses and landlords with qualifying income are required to update HMRC differently. Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) requires maintaining digital records and updating officials each quarter using compatible software. It is estimated that this will entail a transitional setup cost of roughly £280 to £350 per business, tax-deductible.

As well as this, it is thought that there will be annual software costs of around £110 to £115. A 2025 survey by the Administrative Burdens Advisory Board (ABAB) found that 72% of small businesses and agents expected that MTD would increase their costs, Simply Business reported.

All VAT-registered businesses have been using Making Tax Digital-compatible software to keep digital records and submit returns since April 2022. The Government later announced in December 2022 that MTD for ITSA would be introduced for businesses, self-employed individuals and landlords with income over £50,000 from April 2026.

Those with income over £30,000 will be mandated from April 2027.

The threshold will be changed to £20,000 in 2028.

Full changes as of April 6

Businesses, self-employed people and landlords are required as of earlier this month to operate MTD in relation to their trading and property income chargeable to income tax and class four national insurance contributions.

Records will also be kept digitally, and digital quarterly updates will be provided quarterly.

ITSA return information will need to be provided to HMRC through MTD-compatible software.

The Government insists that it “has been clear that if a business cannot go digital, it will not be required to do so”.

The change is “intended to help businesses get their tax right”, officials add.

HMRC adds that it “continues to work with the MTD Accessibility Working Group and the Additional Needs Working Group to support all customers”.

It also points out that businesses that are already exempt from engaging with HMRC through other mandatory digital channels, for example, for MTD for VAT, will be exempted from the MTD for ITSA requirements.

If a business is not already exempt, it may request that HMRC consider an MTD exemption so it will not have to meet the MTD requirements.