Making Tax Digital (MTD) for Income Tax is now underway for qualifying sole traders and landlords, and HMRC has published its first set of statistics following the initial quarterly update deadline.
More than 436,000 taxpayers successfully submitted their first quarterly update for the 2026-27 tax year, while more than 570,000 had signed up for the service by 12 August 2026.
However, HMRC has indicated that a significant number of taxpayers who need to use MTD have not yet registered.
HMRC is now beginning to automatically sign up taxpayers who it believes should be using the system.
What is Making Tax Digital for Income Tax?
MTD for Income Tax requires qualifying sole traders and landlords to keep digital records and send quarterly updates to HMRC using compatible software.
For the 2026-27 tax year, the rules apply to individuals whose qualifying income from self-employment and property was more than £50,000 in the relevant 2024-25 tax year, unless they are exempt.
The first quarterly update covered the first three months of the tax year and had a deadline of 7 August 2026.
How many taxpayers have signed up?
HMRC’s latest figures show that more than 570,000 taxpayers had signed up for MTD for Income Tax by 12 August 2026.
More than 436,000 had successfully submitted their first quarterly update.
However, HMRC had previously estimated that more than 864,000 sole traders and landlords would be within scope from April 2026.
This means there was still a substantial gap between the number of people HMRC expected to need MTD and the number who had signed up.
HMRC begins automatic sign-up
HMRC has confirmed that from September 2026 it will begin signing up taxpayers who need to use MTD for the 2026-27 tax year but have not signed up themselves.
HMRC says this will be based on information it already holds, including records showing qualifying income above £50,000 in the 2024-25 tax year.
The automatic sign-up process will take place in stages.
Taxpayers will be contacted after HMRC has signed them up.
Why sign up yourself?
If you’re required to use MTD but haven’t yet registered, you can still sign up yourself or ask your agent to do it on your behalf.
There is an advantage to taking action yourself: you can check that your income sources and current circumstances are correct when you register.
HMRC has warned that when it automatically signs someone up, it relies on the information it already holds. This may not reflect changes that have happened since the taxpayer’s last Self Assessment return.
Taking action yourself can therefore help identify any issues before they cause problems.
What happens if HMRC signs you up?
If HMRC automatically signs you up, it will contact you to confirm this.
You’ll then need to follow the relevant steps to check your information and make sure your MTD arrangements are correct.
This is particularly important if your circumstances have changed since your last tax return.
For example, you may have stopped trading, changed your income sources or changed your business arrangements.
If you’ve received a letter or online message from HMRC about being signed up, don’t ignore it.
What about quarterly updates?
Once you’re using MTD, you’ll need to keep digital records and send quarterly updates through compatible software.
Quarterly updates are summaries of your income and expenses. They are not tax returns.
For standard update periods, the next deadline for the 2026-27 tax year is 7 November 2026, followed by 7 February 2027 and 7 May 2027.
If you’ve missed the first quarterly deadline, HMRC has confirmed there will be no penalty points for late quarterly updates during 2026-27.
However, that doesn’t mean you can simply ignore the missed update.
HMRC still requires the quarterly information to be submitted, and quarterly updates are required before the relevant tax return can be submitted.
MTD does not replace Self Assessment
One common misunderstanding is that quarterly MTD updates replace the Self Assessment tax return.
They don’t.
For the 2026-27 tax year, taxpayers within MTD will still need to submit their tax return, with the quarterly updates forming part of the new digital reporting process.
The usual Self Assessment payment deadline remains 31 January following the end of the tax year.
What about penalties?
Although there are no penalty points for missing quarterly updates during 2026-27, penalties can still apply to other obligations.
HMRC has confirmed that late tax returns and late payments can still result in penalties.
A points-based system for MTD obligations will apply from the 2027-28 tax year.
Under the new system, taxpayers can receive penalty points for missed deadlines, with a fixed £200 penalty applying once the relevant points threshold is reached.
MTD is expanding
The rollout doesn’t stop with taxpayers earning more than £50,000.
The qualifying income threshold is due to reduce for later tax years, with MTD applying from April 2027 to taxpayers with qualifying income over £30,000 and from April 2028 to those with qualifying income over £20,000, subject to the relevant rules and exemptions.
This means MTD will eventually affect many more sole traders and landlords.
Even if you’re not currently required to use MTD, it may be worth understanding the rules if your income could put you within scope in a future tax year.
What should you do if you haven’t registered?
If you think you may be required to use MTD for Income Tax, don’t wait for HMRC to contact you.
Start by checking your qualifying income and whether the rules apply to you.
If you’re within scope, you can sign up yourself or ask your accountant or tax agent to do it for you.
You’ll also need compatible software capable of keeping your digital records and sending quarterly updates to HMRC.
If you’re already within MTD but haven’t submitted your first quarterly update, you should still submit it as soon as possible.
Final Thoughts
The first MTD statistics show that hundreds of thousands of taxpayers have already made the transition, but HMRC’s automatic sign-up programme means more sole traders and landlords will now be brought into the system.
If you think you should be using MTD but haven’t registered, it’s worth taking action rather than waiting for HMRC to sign you up.
Getting registered, checking your information and making sure your software is ready can make the transition much easier.
If you’re unsure whether MTD applies to you, haven’t yet registered or have received a letter from HMRC, get in touch. We’re happy to help you assess your obligations and get your MTD arrangements in place.
📞 01527 368220
📧 info@ojwassociates.co.uk
