Launch Animal Crossing: New Horizons
From the title screen, press the minus button
Select Save Data Settings
Choose Delete Resident Registration
Select your character
Confirm the deletion
Repeat for any other residents you want removed
To restart the whole island, delete the island save data from the Nintendo Switch system settings
On the Nintendo Switch home screen, open System Settings
Go to Data Management
Select Delete Save Data
Choose Animal Crossing: New Horizons
Confirm deletion
Start the game again to create a new island