HMRC writes to 864,000 traders as digital tax deadline moves inside four months
Long the reform that never quite arrived, Making Tax Digital hardened into a firm obligation in December 2025 as HMRC began writing to the people it will bind.
Making Tax Digital for Income Tax moved decisively closer in December 2025, as the first tranche of HM Revenue and Customs mandation letters — posted from November — landed with the sole traders and landlords caught by the reform, and the compulsory start date of 6 April 2026 slipped inside four months. HMRC estimates that around 864,000 people with qualifying income above £50,000 will be pulled into the regime in its opening phase, the biggest change to personal tax administration in a generation.
From one return to five filings
From 6 April 2026, affected sole traders and landlords must keep digital records and file four quarterly updates through commercial software, followed by a year-end final declaration that replaces the annual self assessment return. The updates are due on 7 August, 7 November, 7 February and 7 May; the first, covering 6 April to 5 July 2026, must reach HMRC by 7 August 2026. The final declaration for the 2026-27 year falls due by 31 January 2028.
The £50,000 threshold is measured against combined self-employment and property income reported on the 2024-25 return. It drops to £30,000 from April 2027 and to £20,000 from April 2028, progressively sweeping in hundreds of thousands more taxpayers on far more modest incomes.
A soft landing, and a readiness gap
The Autumn Budget on 26 November 2025 confirmed a concession that first-year joiners had lobbied for: those mandated from April 2026 will not receive penalty points for late quarterly updates during the first 12 months. The easement does not extend to the year-end declaration, and HMRC stressed that digital record-keeping remains compulsory and that updates must still be filed before a return can be submitted.
Awareness, though, remained thin. Professional bodies including the Chartered Institute of Taxation and the Association of Taxation Technicians had repeatedly warned that many affected taxpayers neither understood the change nor were ready for it. As the letters were readied, Emma Rawson of the ATT said: "Nothing makes things feel real quite like that brown envelope landing on the doormat." In the autumn, HMRC's director of Making Tax Digital, Craig Ogilvie, had urged the self-employed to "get ahead of the game now with our testing programme", pointing to a voluntary pilot through which thousands of quarterly updates had already been filed.
What it meant for contractors
For most IT contractors the immediate reach is narrower than the headline figure suggests. Making Tax Digital for Income Tax applies to self-employment and property income, not to money earned inside a limited company. The many contractors who work through a personal service company and draw salary and dividends therefore stay outside the quarterly regime for their trading income, continuing to report through the company and their existing self assessment return.
The exposure lies elsewhere. A contractor operating as a sole trader is squarely within scope, and — because qualifying income aggregates trading and rental receipts — so is anyone whose freelance and buy-to-let earnings together tip over the threshold. With the trigger falling to £30,000 and then £20,000 within two years, a single rental property alongside occasional self-employment will be enough to compel quarterly filing for many. The task before April is unglamorous but pressing: choosing compatible software and moving record-keeping onto it from the first day of the tax year.
A decade in gestation, Making Tax Digital had by December 2025 stopped being a consultation document and become a diary entry.