If you're a sole trader or landlord who hasn't signed up for Making Tax Digital for Income Tax yet, you may soon get a letter from HMRC. HMRC said this summer that from September it will begin signing up customers that need to use Making Tax Digital for Income Tax for the 2026 to 2027 tax year but have yet to do so. That process has now started. Below we explain who is affected, why being signed up by HMRC isn't the best option, and what to do before the next quarterly deadline.
Why HMRC is stepping in
MTD for Income Tax is now in force. Sole traders and landlords earning more than £50,000 have been required to keep digital records and send quarterly updates to HM Revenue and Customs (HMRC) since April 2026. The threshold is based on your total income from self-employment and property. This is the amount before expenses (also known as turnover), based on the tax return you submitted in the previous year.
Many people still haven't signed up. HMRC's own figures show more than 570,000 of the estimated 864,000 in-scope taxpayers have already registered, and over 436,000 filed their first quarterly update by 7 August 2026. That leaves roughly 294,000 people who HMRC will now add to the system itself.
How automatic sign-up works
HMRC is using information from 2024/25 Self Assessment Tax Returns to identify those with qualifying income above £50,000. The process will take place in stages over the coming months, and HMRC should contact you once you have been signed up. If you're affected, you should receive a letter (either by post or through online services if you have signed up to receive your communications this way). HMRC also plans to pause automatic enrolment around the 31 January 2027 Self Assessment filing deadline.
One point matters more than any other: being signed up by HMRC doesn't take any of your obligations away. If HMRC sign you up automatically, you will still need to comply with the MTD requirements from the date they apply to you, unless you qualify for an exemption.
Why it's better to sign up yourself
- Your details may be out of date. HMRC's automatic registration relies on information it already holds, which may not reflect changes since your last tax return.
- Businesses you've closed. Because HMRC is working from 2024/25 returns, someone who stopped trading or sold a rental property during 2025/26 could be signed up for a business that no longer exists. If every MTD source ceased before 6 April 2026, do not use the online sign-up process. Contact HMRC by phone or webchat, state clearly that all of your MTD sources of income have ceased.
- Amending details later. Some commentators warn that people who wait may also find it more difficult to amend certain details once HMRC has completed the enrolment process on their behalf.
Signing up is simple: if you're a sole trader or landlord, use the online service to sign up for Making Tax Digital for Income Tax, or ask your accountant to do it for you.
The next deadline: 7 November 2026
The second quarterly update covers the period 6 July 2026 to 5 October 2026 (or 1 July 2026 to 30 Sept 2026 if calendar quarters election is made), due by 7 November 2026. If you missed the first update in August, you'll need to use software that works with Making Tax Digital for Income Tax to send any missed quarterly updates for the year so far.
Penalties: a soft landing, not a free pass
There's some good news. No penalty points will be issued for late quarterly updates during the 2026 to 2027 tax year. Penalties still apply for late tax returns and late payments. But HMRC is clear that you still need to keep digital records and send quarterly updates before you can submit your tax return.
From 6 April 2027 the full regime applies. Taxpayers receive one penalty point for each missed quarterly deadline. Once four points are accumulated, a £200 fixed penalty is charged.
Remember that your 2025/26 return is still filed the old way. If you use Making Tax Digital for Income Tax from 6 April 2026, current penalties will apply to your 2025 to 2026 tax return deadline of 31 January 2027.
Below £50,000? Your turn is coming
Automatic sign-up only covers the first group. From April 6 2027, MTD for Income Tax will apply to sole traders and landlords with qualifying income of more than £30,000, based on information reported in their 2025/26 tax return. From April 2028, the threshold will reduce to £20,000. Later groups shouldn't expect the same leniency: any taxpayer required to join MTD for Income Tax in a later period where the threshold for qualifying income is lower will not have a years' grace. In other words, the 2025/26 return you file by 31 January 2027 could decide whether you're in from next April.
Your action checklist
- Add up your gross self-employment and property income from your 2024/25 return. If it's over £50,000, sign up now rather than waiting for HMRC.
- Choose HMRC-recognised software. Bridging software is also available if you prefer to continue using spreadsheets.
- Catch up on any missed August update and diarise 7 November.
- If you get an HMRC letter and think it's wrong (for example, because your business has ceased or you qualify for an exemption), respond promptly.
- If your 2025/26 income was over £30,000, start preparing for April 2027 now.
If you'd like support with bookkeeping, Self Assessment or MTD-compliant record keeping, have a look at our accounting services.
How MyTaxLead can help
We can check whether MTD applies to you, sign you up with the right details, set up suitable software and file your quarterly updates and year-end return for you. If you've had a letter from HMRC or missed a deadline, don't worry. Get a free quote and we'll get you back on track.