Important: HMRC Is Now Automatically Signing People Up for MTD for Income Tax

Written by James

If you’re a sole trader or landlord in East Lothian or Edinburgh, HMRC’s approach to Making Tax Digital has changed. This applies to MTD for Income Tax, the digital tax-reporting system for sole traders and landlords. It used to say “you should sign up.” Now it says “we’ll sign you up ourselves if you don’t.” From September 2026, HMRC is working through its records and automatically enrolling anyone who qualifies but hasn’t registered. Here’s what’s happening, who it affects, and what to do before your letter arrives.

Who HMRC is signing up, and why now

MTD for Income Tax became mandatory in April 2026. It applies to sole traders and landlords whose qualifying income – turnover from self-employment and property combined, before expenses – exceeds £50,000. HMRC calculates that figure from your 2024–25 tax return. If you’re not sure the rules apply to you, our guide on MTD for Income Tax: what sole traders need to do now covers the basics.

Plenty of people who meet that threshold haven’t signed up yet. Some didn’t realise the rules applied to them. Others were waiting for HMRC to tell them.

HMRC is now closing that gap itself. From September 2026, it’s working through eligible taxpayers in stages, enrolling them automatically for the 2026–27 tax year and sending a confirmation letter once it signs each person up (see HMRC’s official guidance).

It’s worth being clear about what the £50,000 figure includes. It’s not just profit. Add your total turnover from self-employment and property income together, before deducting any expenses. A landlord with two rental properties and a small side business could easily cross the threshold on combined turnover, even if take-home profit is far lower. Check your own figures rather than assuming the rule doesn’t apply to you.

Why you might want to sign up yourself rather than wait

You don’t have to wait for HMRC’s letter. You, or your accountant on your behalf, can register for MTD for Income Tax now. HMRC itself flags one advantage to doing it this way: signing up yourself lets you check your income sources and circumstances from day one. Otherwise you inherit whatever HMRC’s system already holds on file. That record may be outdated if you’ve changed address, added a rental property, or changed your business activities since your last return.

Getting ahead of it also gives you more control over timing. An automatic sign-up notice can land unannounced. Choosing your own moment gives you breathing room to get your software and records sorted.

What MTD for Income Tax actually involves

Once you’re in the scheme, three things change from how Self Assessment has worked until now:

• Digital record keeping – your income and expenses live in MTD-compatible software, not a plain spreadsheet.
• Quarterly updates – you send HMRC a running summary roughly every three months, instead of one annual return.
• A final declaration – you confirm your full tax position at year end, in place of the old Self Assessment submission.

Digital record keeping. You’ll need to keep your business income and expense records digitally, using MTD-compatible software. A spreadsheet alone generally isn’t enough unless you link it through what’s called “bridging software.” If you’re unsure what you’re required to keep, see our guide on what records you need to keep as a sole trader.

Quarterly updates. Instead of one annual tax return, you’ll send HMRC a summary of your income and expenses roughly every three months through your software. Our MTD quarterly deadline schedule sets out the actual dates. These are running totals, not a full tax calculation, so there’s less pressure than the old year-end return. HMRC has also confirmed it won’t apply penalty points for late quarterly updates during the scheme’s first year, 2026–27. Treat that as a grace period, though, not a permanent exemption. If you’ve already missed one, our post on what happens after MTD’s first quarterly deadline explains where you stand.

Your year-end final declaration

A final declaration. At the end of the tax year, you’ll still need to add any other income – savings interest, dividends, or employment income – and submit a final declaration to HMRC. This confirms your tax position, much like the current Self Assessment return, but you’ll do it through your MTD software rather than the old online form.

Penalties for late final declarations still apply as normal. The relaxed first year only covers the quarterly updates, not the year-end submission.

What software do you need for MTD for Income Tax?

You’ll need software HMRC recognises as compatible. Cloud packages such as QuickBooks and Xero are both built for MTD for Income Tax and handle the quarterly submissions directly. If you already keep records in a spreadsheet, bridging software can link that spreadsheet to HMRC without a full switch of systems – useful if you’re not ready to change how you work day to day, though most people find dedicated software simpler once they’re used to it.

What to do next

If your qualifying income was over £50,000 in 2024–25 and you haven’t heard from HMRC yet, don’t wait for the letter. Start now. Check whether the threshold applies once you add your rental and self-employment turnover together. Get compatible software in place, and make sure HMRC holds accurate details of your income sources.

If you’d rather not untangle this on your own, that’s exactly what we’re here for. Premier Bookkeeping & Accountancy Services can check whether MTD applies to you, help you register before HMRC does it for you, and get you set up with the right bookkeeping software. We’ll also keep your quarterly updates running smoothly once you’re in the scheme. Get in touch and we’ll take it from there.