Key Takeaways
- From September 2026, HMRC will automatically enrol around 294,000 taxpayers into Making Tax Digital for Income Tax if they have not signed up themselves.
- The first MTD for Income Tax cohort covers sole traders and landlords with qualifying income above £50,000, based on their 2024/25 Self Assessment return.
- 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.
- HMRC will pause automatic enrolment around the 31 January 2027 Self Assessment filing deadline.
- No penalty points will be applied for late quarterly updates in the 2026/27 tax year, but late tax returns and payments still incur penalties.
- Businesses that sign up voluntarily can verify their income details before HMRC enrols them using potentially outdated records.
What has HMRC announced about automatic MTD sign-up?
HM Revenue & Customs (HMRC) confirmed on 12 August 2026 that, starting in September 2026, it will gradually register for Making Tax Digital (MTD) for Income Tax those taxpayers who, in HMRC's view, should have joined the regime for 2026/27 but have yet to do so. The exercise will run in stages over the following months, adding thousands of people to the system each day. A pause is planned around the busy Self Assessment filing window leading up to 31 January 2027.
Automatic enrolment covers only the first mandatory cohort: taxpayers whose qualifying income — broadly their total income from self-employment and property before expenses — exceeded £50,000, making MTD compulsory from 6 April 2026. According to HMRC's published figures, more than 570,000 of the estimated 864,000 taxpayers in scope have already registered, and HMRC estimates that over 436,000 of these submitted their first quarterly update by the 7 August deadline. The remaining roughly 294,000 people are the group HMRC will now add to the system automatically.
Who is affected by Making Tax Digital for Income Tax?
MTD for Income Tax became mandatory from 6 April 2026 for sole traders and landlords. It applies where combined gross income from self-employment and property businesses exceeded £50,000 in the 2024/25 tax year. Qualifying income is measured before expenses, based on the tax return submitted in the previous year.
Once enrolled, taxpayers must use compatible software to:
- keep digital records
- send quarterly updates to HMRC
- submit an end-of-year tax return through the MTD system
The first quarterly update for 2026/27 was due by 7 August 2026. The second is due by 7 November 2026. Certain exemptions apply, some of which require a claim to HMRC.
The threshold drops over the coming years. From April 2027, taxpayers with qualifying income above £30,000 fall within scope. From April 2028 the threshold falls to £20,000. Those later cohorts will still need to sign up themselves rather than wait for automatic enrolment.
What happens after HMRC signs a taxpayer up?
Once HMRC enrols a taxpayer, it will write to them confirming the registration and setting out the next steps. Taxpayers are asked to:
- check that their MTD income tax details are correct
- choose software compatible with the regime
- catch up on any missed quarterly updates
Because HMRC relies on information from the 2024/25 tax return, the records may not reflect recent changes such as a ceased trade or property business. Verifying the details promptly is therefore important.
Importantly, registration itself does not resolve the operational side. Digital record keeping, software selection and outstanding submissions remain the taxpayer's responsibility. Businesses and their advisors are encouraged to act now, as voluntary sign-up allows details to be verified before HMRC's automatic process begins. Those operating through a limited company remain outside MTD for Income Tax. The regime applies to sole traders and landlords rather than company directors drawing salary or dividends.
Are penalties in place for the 2026/27 tax year?
Under the new points-based penalty regime for MTD for Income Tax, a penalty point is awarded for each late quarterly update. A £200 penalty applies once four points accumulate. However, HMRC has confirmed that no penalty points will be awarded for late quarterly updates during the first tax year, 2026/27. This gives taxpayers a transition period to adapt to the new system.
Penalties will still apply for late end-of-year tax returns and late payment of tax bills. The softer first-year approach reduces the immediate risk for the roughly 294,000 taxpayers being auto-enrolled. They should still file outstanding updates promptly, as digital records must be maintained from the start of the period they apply.
Frequently Asked Questions
HMRC begins automatically enrolling unregistered taxpayers from September 2026, in stages over the following months, pausing around the 31 January 2027 Self Assessment deadline.
Sole traders and landlords with combined gross income from self-employment and property above £50,000, based on their 2024/25 tax return, must use MTD for Income Tax from 6 April 2026.
Around 294,000 taxpayers who were mandated into the first cohort but have not signed up will be enrolled, out of an estimated 864,000 in scope.
No. HMRC will not apply penalty points for late quarterly updates during the 2026/27 tax year, though penalties still apply for late tax returns and late payment.
They should check their MTD details in their HMRC online account, choose compatible software, and submit any missed quarterly updates for the year so far.
