As the 31st of January tax return deadline rapidly approaches, this will be the final submission before major changes to the self-assessment process are introduced.

From April 2026, as part of the government’s plans to modernise the tax system, self-employed business owners with a qualifying income over £50,000 will no longer submit a single annual tax return, and will instead be required to submit quarterly updates.

Rob Rees, Divisional Director at Markel Direct, the specialist insurer of freelancers and small businesses, breaks down what HMRC’s Making Tax Digital for Income Tax Self-Assessment is, gives guidance on who will be impacted by the switch and how to best prepare.

What is the proposed change?

HMRC’s Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) will transform how self-employed individuals and landlords report their income. Instead of one yearly submission with a deadline of January 31st, those earning over the qualifying threshold will be required to send quarterly digital updates throughout the year, which is then followed by a final end-of-year declaration.

By addressing the most common avoidable mistakes, such as missing deadlines or failure to declare all income, MTD for ITSA aims to improve accuracy. The changes could ensure the correct amount of tax is paid and reduce the tax gap, which is thought be around 18.5%, or £5 billion for self-assessment businesses.

Who Will Be Affected by the April 2026 Changes?

The first phase of Making Tax Digital applies to:

• Freelancers and sole traders earning over £50,000
• Landlords with property income above £50,000

The threshold will be based on the income reported in the 2024/25 tax return, with the government projecting around 780,000 people will fall into this category. Those earning between £30,000 and £50,000 will follow from April 2027, based on the income reported in the 2025/26 tax return, whilst those earning under £30,000 are still under review and have the option to sign up voluntarily.

How to Prepare for the Switch to Digital

Tax returns can be daunting for any business, especially for sole traders who manage their tax affairs without an accountant. To help you stay ahead of the game, here are four key takeaways to consider ahead of the transition, to ensure a seamless shift.

• Adopt HMRC-compatible software early: From April 2026, all quarterly submissions will need to be made using HMRC-approved accounting software by sole traders, freelancers and landlords who exceed the qualifying threshold. Spreadsheets and manual uploads will no longer be acceptable.
• Get into the habit of tracking expenses monthly: Instead of storing receipts and invoices for submission at the end of the tax year, get into the habit of recording business transactions monthly.
• Seek professional accounting support: An accountant will be able to provide guidance on whether a self-employed person is meeting the new MTD reporting standards. Engaging one early on, before the system changes, gives time to address gaps in current record keeping and/or software setup.
• Set reminders for quarterly submission dates: From April 2026, sole traders and landlords earning over the £50k qualifying threshold will no longer have just one tax deadline to consider, but instead five. To allow adequate preparation time, individuals should set reminders to avoid any potential late penalties.

You can find more information about Making Tax Digital for Income Tax here.

What the self-employed still need to do for January 31^st: Four final-hour checks before the 2026 deadline

For now, self-employed individuals must complete and submit their 2024/25 tax return (covering income earned between the 6^th of April 2024 and 5^th of April 2025) by the 31^st January 2026. The Basis Period Reform took effect in 2023-24 which means that profits must now be calculated on a strict tax year basis, regardless of the accounting date. Anyone who previously used a different accounting year end should have already transitioned and applied overlap relief where applicable.

Here are four tips to consider before the deadline.

1. Double-check income sources
   Ensure all self-employed and freelance earnings have been accounted for; this includes any taxable ‘side hustle’ income via digital platforms for the period between the 6th of April 2024 and the 5^th of April 2025.
2. Revisit allowable expenses
   Review business-related costs, such as utilities, travel, software, insurance and training, to ensure you’re claiming everything permitted by HMRC to help reduce your tax bill. An extensive list can be found on the HMRC website.
3. Confirm payment details with HMRC
   Check that your Government Gateway account information, including payment methods and contact information are all up to date.
4. Back up records
   Save copies of receipts, invoices, and financial statements securely (digitally and physically) in case of an HMRC audit.

As the move to Making Tax Digital draws closer, the key for freelancers, sole traders and landlords is preparation. Familiarising yourself with Making Tax Digital-ready accounting software, maintaining accurate expense records, and understanding reporting obligations are vital steps to avoid unexpected penalties.