Making Tax Digital (MTD) for Income Tax is now a reality for hundreds of thousands of sole traders and landlords, but HMRC figures suggest a significant number of those required to comply have yet to do so.
Of the 864,000 taxpayers expected to register for MTD from April 2026, around 570,000 have registered, with approximately 436,000 successfully submitting information so far.
HMRC is now taking matters into its own hands by beginning to sign up taxpayers it believes should already be within MTD rather than waiting for them to register themselves.
For those affected, the message is increasingly clear. MTD is mandatory and being signed up by HMRC does not remove the need to get the right processes and software in place.
Sole traders and landlords with qualifying income above £50,000 should have joined MTD for Income Tax from 6 April 2026, unless they qualify for an exemption.
Those within the rules should now be keeping digital records using compatible software and submitting quarterly updates to HMRC.
HMRC has confirmed that taxpayers it identifies as being within scope but who have not registered may now be signed up automatically. Those affected will receive either a letter or digital message depending on their communication preferences.
They will then need to take the necessary steps to comply, including obtaining and using MTD-compatible software.
While penalty points will not be issued for late quarterly updates during 2026/27, this should not be seen as an indication that businesses can delay indefinitely. The first year provides some breathing room while taxpayers adjust, but the underlying requirements still apply.
Attention is also turning to the next phase of Making Tax Digital.
Sole traders and landlords with qualifying income exceeding £30,000 during 2025/26 are due to join MTD from 6 April 2027.
For those joining MTD in April 2027, there is still time to prepare, but choosing software should only be part of that process.
MTD requires businesses and landlords to maintain digital records throughout the year. If records are currently brought together retrospectively for an annual tax return, moving to quarterly updates may require a change in bookkeeping habits as well as technology.
Starting earlier gives you time to choose suitable software, establish how information will be recorded and address any gaps before quarterly reporting becomes mandatory.
HMRC's decision to begin registering taxpayers itself is an important development. It demonstrates that Making Tax Digital is moving beyond the implementation stage and into active compliance.
For anyone who should have joined in April 2026 but has not yet done so, waiting for HMRC to make contact is unlikely to be the best approach. Getting your records and software in order now should make future submissions considerably easier.
Those due to join from April 2027 have an advantage: time.
Using the months ahead to improve bookkeeping processes and become familiar with digital record keeping can make the move to MTD far more manageable. And where there is a genuine reason why digital compliance is not possible, it is worth considering the exemption criteria sooner rather than later.
HMRC's guidance on applying for an exemption from Making Tax Digital for Income Tax can be found here:
Apply for an exemption from Making Tax Digital for Income Tax
All data and figures referred to in our news section are correct at the date of publishing and should not be relied upon as still current.
