HMRC has announced that it will start taking action on taxpayers who haven’t yet signed up to Making Tax Digital (MTD) for Income Tax.
From September 2026, HMRC plans to begin automatically signing up taxpayers it believes should have been using MTD since April.
For sole traders, landlords and other small business owners affected by MTD, this is an important reminder that MTD is not optional and it may be better to take action rather than wait for HMRC to do it.
Who does this affect?
HMRC originally estimated that around 864,000 taxpayers would need to join MTD for Income Tax from April 2026.
To date more than 570,000 have registered and over 436,000 have successfully submitted quarterly updates. That leaves a significant number of people who HMRC believes should already be within the new system.
From September, HMRC will start signing up those taxpayers in stages.
Importantly, this action relates to people who were required to join MTD from April 2026. Those coming into the system from April 2027 or 2028 will still be expected to sign up themselves, or ask their accountant to do so on their behalf.
What happens if HMRC signs you up?
If HMRC believes you should be using MTD, it will sign you up and contact you by letter or digital message to explain what happens next.
You will then need to make sure you are ready to meet the MTD requirements. This includes:
- Keeping appropriate digital accounting records;
- Using MTD-compatible software;
- Checking HMRC has the correct details for your business; and
- Submitting the required quarterly updates and year-end information.
HMRC is also expected to ask taxpayers who are automatically enrolled to check the businesses listed on their tax account.
This is particularly important because HMRC will be using historic tax return information to identify businesses. Its records may therefore include a business that has since ceased trading or may not reflect a more recent change in circumstances.
Why it is worth checking your position now
If you think you should have joined MTD in April but haven’t yet done so, we’d recommend checking your position now rather than waiting for HMRC to contact you.
Signing up proactively gives you more control over the process and provides an opportunity to check that HMRC’s information is correct before your MTD obligations are established. Equally, you may have a good reason for not being registered.
For example, your circumstances may have changed since the tax return information HMRC is using, or you may qualify for an exemption that HMRC does not yet know about.
Resolving these issues before HMRC automatically registers you could make the process considerably simpler.
Already missed a quarterly update?
The first MTD quarterly update deadline was 7 August 2026, so business owners who should have been within MTD from April may understandably be concerned about having missed it.
Don’t worry – quarterly updates are cumulative and there are no penalty points for late quarterly updates during 2026/27. This means taxpayers brought into the system late will not necessarily have to go back and submit every missing update individually. Their records can instead be brought up to date through a later submission.
However, this doesn’t mean the quarterly reporting requirements can be ignored. Those within MTD will still need to maintain the appropriate digital records and comply with the requirements for the remainder of the tax year.
What should SME owners do?
If you’re a sole trader or landlord and are unsure whether MTD for Income Tax applies to you, now’s a sensible time to check.
Don’t assume that because you haven’t heard from HMRC, you don’t need to do anything. Equally, if HMRC does contact you to say you’ve been automatically enrolled, don’t assume all of the information it holds about your business is necessarily up to date.
We can help you understand whether MTD applies to you, check your records and registration position, and make sure your bookkeeping and accounting software are ready for the new reporting requirements.
If you’re unsure where you stand with Making Tax Digital, please get in touch with our Chichester team. We can help you understand what you need to do and make the transition as straightforward as possible.