Data crunch suggests more than 800,000 people will need to switch to department’s new submission system for income next month, as sector organisations report ‘frustration and ‘uncertainty’ among their members
HM Revenue and Customs has published figures showing the sections of the UK economy where self-employed people are most likely to be impacted by the latest expansion of the Making Tax Digital programme.
Departmental data suggests that more than 800,000 additional people will have to make quarterly digital submissions of their earnings and expenses using HMRC-approved software in the 2026-27 financial year.
HMRC’s figures come as organisations representing freelancers and landlords told PublicTechnology of “frustration” and “uncertainty” among their members.
The rollout of Making Tax Digital (MTD) began in 2019 with a requirement that VAT-registered businesses must make digital submissions to HMRC if they had a turnover in excess of £85,000 a year. The requirement extended to all VAT-registered businesses and organisations in 2022.
From next month, people who are self-employed and classed as “sole traders” need to start making quarterly digital returns for income tax self-assessment if their turnover is £50,000 a year or more. Landlords with revenue from property above that figure – or combined turnover from self-employment and property income in excess of £50,000 a year – also need to start providing quarterly digital submissions to HMRC using approved software.
From April 2027, self-employed people and landlords with annual turnover of £30,000 a year or more will be required to make quarterly digital returns as part of MTD’s ongoing expansion. A year after, this threshold will be lowered again to £20,000.
Data released by HMRC last week showed that 864,000 people are likely to be required to shortly begin submitting quarterly returns, based on a crunch of self-assessment income tax returns filed for the 2023-24 financial year.
I think if you asked 100 landlords today, probably 99 of them wouldn’t be that positive about what’s going to happen
Chris Norris, chief policy officer, NRLA
Of that figure, 605,000 people are self-employed with no earnings from property; 141,000 are self-employed with earnings from property; and 118,000 are landlords who are not self-employed.
A sector-by-sector breakdown of the figures shows the construction industry is the largest single-sector grouping, with 251,000 people suggested as being in scope for Making Tax Digital.
The second-largest sector is real estate, with a total of 125,000 people with self-assessment turnover in excess of £50,000. People who are only landlords made up the bulk of the figure. Just 3,000 people were described as working in real estate and in scope for Making Tax Digital but not landlords; 4,000 people working in real estate were both self-employed and landlords.
The third-largest sector is professional, scientific and technical services, with a total of 77,000 believed to be in scope for MTD, based on the 2023-24 figures. Of that grouping, 57,000 people were self-employed but not landlords, the remainder also had property income.
Some 31,000 of the self-employed people projected to be in scope of the digital tax expansion worked in the arts, entertainment and recreation sector in 2023-24. A further 15,000 worked in information and communications.
Bectu represents nearly 40,000 staff, contract and freelance workers in the media, entertainment, and creative industries. It is part of the Prospect union.
‘Burdensome and unclear’
Research officer Rosie Carter told’ PublicTechnology that, while there has been a long lead-in time for Making Tax Digital, there is “still a way to go” to ensure that freelancers are fully prepared for the rollout.
She said a recent webinar for 600 Bectu members hosted by HMRC had revealed confusion about who is in scope for Making Tax Digital, especially in relation to members who only get some of their earnings as self-employed – with income taxed directly via the pay-as-you-earn regime.
“Many of our members work across multiple roles as well as different employment and tax statuses, so the fact that people must report quarterly updates for each self-employed trade makes the process slightly more complex,” she said. “The requirement to submit separate quarterly updates for every trade – for example acting, directing, voice work, coaching – is burdensome and unclear.”
She said many Bectu members work intermittently, because of the project-based nature of the creative industries.
“Members may work intensely for a few months, then not at all for a few months, which is difficult to predict,” she said. “There needs to be some clarification on quarterly reporting when people are out of work.”
Carter added: “There has also been uncertainty about software requirements and compatibility, especially that some tools must be paid for and also that commercial accounting tools don’t align with how they currently track expenses, such as with spreadsheets or with their ‘allowable expenses’.”
In scope of MTD expansion as of April 2026
Construction
224,000
Landlords
118,000
Wholesale and retail trade
57,000
Professional, scientific and technical
57,000
Health and social work
40,000
Chris Norris, chief policy officer at the National Residential Landlords Association (NRLA), which has more than 110,000 members, is positive about the long-term benefits of Making Tax Digital. He thinks quarterly reporting and a push towards accounting software will ultimately be a technological nudge in the right direction for many in the sector, and one that will lead to better organisation.
However, he acknowledges that, in the short term, future benefits have to be balanced against frustration about administration changes imposed on members’ business.
“I think if you asked 100 landlords today, probably 99 of them wouldn’t be that positive about what’s going to happen,” he said, in relation to Making Tax Digital. “I think most people who are mandated – in year one at least – are going to find it quite a nuisance. They’re going to have quite a lot of admin to do because a lot of them will be switching to completely new software for the first time. They’ll have all that onboarding time.”
He adds: “They’ll have all the ins and outs of getting used to using a new system. And they’ll have the cost of the subscription to that software, because most of the software that I’ve come across has been a monthly or annual subscription model. That does add a small cost to your business. So, I think there’s going to be a lot of frustration and nuisance involved in doing that, as well as the potential benefit of seeing what comes down the track.”
Norris said that, up until late last year, the NRLA was concerned about the extent to which landlords likely to be in scope for 2026-27 Making Tax Digital returns were ready for the switch.
“As we get closer and closer to the deadline, more and more people have organised,” he said.
Calls for clarity
Norris believes part of the problem was a lack of clarity about what software was required and appropriate companies to work with.
“I think, because this policy has been delayed a few times and has changed a bit, the accountancy firms and the big software firms were a little bit slow getting some of these to market,” he said. “It’s not necessarily their fault, because they had to change things when HMRC changed their minds about different elements. But I think it’s only in the last few months there’s really been much choice for landlords out there in the marketplace for software.”
Norris believes that most NRLA members who are in scope for Making Tax Digital returns in 2026-27 are “relatively confident” about either deciding to hand everything over to an accountant or the software they will use to do things themselves.
“I think it’s fair to say that a large proportion are quite anxious about what they’re going to need to do, because not that many have proactively prepared and have used the software ahead of time because there’s a cost associated,” he said. “They’re kind of ready to go from April, but they’re a bit anxious about what they’re going to have to do immediately in April when they start logging their income and expenses on this software and how much work will be involved in doing that. But I think they’re getting there, certainly.”
Norris believes HMRC’s communications about the further rollout of Making Tax Digital have been “quite visible”, and said the department’s direct communications with members had helped the prepare.
“What would have been useful is to have had a bit more clarity a bit earlier,” he said. “We’ve worked with HMRC for a number of years on this. This is such an enormous administrative change. Really, it would have been better, from a practical point of view, to have had absolute certainty a year ago on what was necessary, certainty for those software companies about what they had to provide, so that we could have given landlords a whole year of run-up. There’s not been that clarity about the software, and that does stem directly from HMRC and their specification for it.”
In response to enquiries from PublicTechnology, HMRC indicated that it has engaged with software providers throughout the development of the MTD income tax regime – and will continue to do so once the service is fully live. The department also indicated that it strives to provide software publishers with notice of any intended changes to API specifications at least three months in advance.
The tax agency added that, for citizens with income from both self-employment and PAYE roles, the threshold for mandatory MTD submissions is based solely on self-assessment earnings – not the combined figure.
