Making Tax Digital for Income Tax is now live. As of 6 April 2026, every self-employed person and every landlord with turnover above £50,000 has to report to HMRC quarterly through approved software. Miss a deadline and the penalty regime kicks in. This is the largest expansion of compliance bureaucracy on small business in a generation, and almost nobody outside HMRC's press office is calling it a success.
Who Is Caught and What It Costs
The first wave covers anyone above the £50,000 threshold. The next wave — due in April 2027 — drags in anyone above £30,000. That means a plumber turning over £35,000 a year will, within twelve months, be filing five tax returns to HMRC instead of one: four quarterly summaries and a final declaration. Each submission requires MTD-compatible software, which is not free.
The Federation of Small Businesses estimates additional compliance costs of £300 to £1,000 per year per business once software, accountancy support, and lost time are accounted for. For a one-person trader on a tight margin, that is the price of a holiday. Or a quarter of rent. Or a Christmas. That is not modernisation. That is a tax on being self-employed.
HMRC Doesn't Need This Data Quarterly
Defenders of MTD will tell you it reduces error and brings the system into the 21st century. HMRC have been arguing that line since 2015. The reality is that HMRC does not act on quarterly data. Adjudication of small business tax returns happens at year-end the same way it always has. The quarterly submissions are warehoused, occasionally flagged for compliance picking, and otherwise ignored.
So why force four submissions? Because the longer-term plan is to move more taxpayers onto a real-time withholding model — closer to PAYE — where cash flow accrues to the Treasury weekly. MTD is the warm-up act. The trader doing the work pays the cost. The Treasury collects the cash. That is the relationship Labour is institutionalising.
The Hit on Landlords
Landlords are caught twice. Once by the bureaucracy, and once by everything else Labour has stacked onto residential letting: Section 21 abolition coming through, Energy Performance Certificate upgrades looming, mortgage interest relief still gutted from the Osborne era, and quarterly MTD on top of all of it.
The result is predictable. Small private landlords are leaving the sector. They have been leaving for three years. They will leave faster now. The supply of rental property tightens, rents rise, and the same Labour politicians who designed the squeeze stand at the dispatch box and blame "profiteering." Working tenants pay the price.
What Reform UK Would Do
Reform UK would pause MTD for Income Tax for any business below the VAT threshold of £90,000. Nobody turning over £35,000 a year needs to file the Treasury five times a year. We would simplify Self Assessment, not multiply it.
We would also commission a proper independent review of MTD compliance costs versus actual revenue raised. If, as we suspect, the regime collects less than it costs the economy, it should be scrapped. Public administration that fails a cost-benefit test should not survive on inertia.
And we would treat the self-employed and small landlords as what they are — the backbone of the local economy, the people who do the building, the plumbing, the letting, the cleaning, the consulting, and the driving that keeps the country going. Not a compliance dataset to be squeezed.
HMRC has called MTD a "transformation." From the kitchen tables of British small business, it looks like a punishment for working for yourself.