Article by Coconut
HMRC has started automatically signing taxpayers up to Making Tax Digital for Income Tax, with the process expected to continue over the coming months. For sole traders and landlords who have not yet registered, checking your details now could help avoid problems later.
Making Tax Digital (MTD) for Income Tax is now well underway, with more than half a million sole traders and landlords already signed up.
However, thousands of taxpayers who should be using the new system have not yet registered themselves, and HMRC has now confirmed that it will automatically sign up those it identifies as being within the rules.
The process started in September 2026 and will take place in stages over the coming months.
So, what does this mean if you have not yet signed up, and why could it be important to check your details before HMRC does it for you?
How many people have registered for Making Tax Digital?
The rollout of Making Tax Digital for Income Tax is already substantial.
HMRC reported that more than 570,000 customers had signed up by 12 August 2026, with more than 436,000 having successfully submitted their first quarterly update.
HMRC has estimated that around 864,000 individuals are within the first phase of MTD for Income Tax. These figures give an indication of the scale of the rollout, although the number of people who have not yet registered cannot be calculated simply by subtracting one figure from the other.
And the number of people affected is set to increase significantly.
From April 2027, the MTD income threshold will fall from £50,000 to £30,000. It will then fall again to £20,000 from April 2028. This will bring many more sole traders and landlords into the digital tax system.
When will HMRC automatically sign people up?
HMRC began its automatic sign-up process in September 2026, but taxpayers should not expect everyone to be registered at the same time. HMRC has confirmed that the process will take place in stages over the coming months.
The aim is to identify people who HMRC believes should be using MTD for Income Tax but who have not signed up themselves.
For the 2026/27 tax year, HMRC is using information from previous tax returns to identify people whose qualifying income was more than £50,000 in 2024/25.
This is important because the information HMRC holds may not always reflect a taxpayer’s current circumstances.
Could HMRC’s information be out of date?
Potentially, yes.
When someone signs up to MTD themselves, they have the opportunity to review their income sources and provide their current information.
With automatic sign-up, HMRC is working from the information already held on its systems. HMRC acknowledges that this may not include changes to a taxpayer’s circumstances since their last tax return.
For example, someone may have:
- stopped trading as a sole trader
- changed or ceased a property letting business
- changed the nature of their business
- altered their income sources
- become eligible for an exemption from MTD
- circumstances that mean the information on their previous Self Assessment tax return no longer reflects their current position
This does not mean that HMRC’s automatic registration cannot be corrected. Taxpayers can update relevant information after being signed up.
However, it could mean additional administration if the information used to register them is incorrect or incomplete.
HMRC’s guidance provides different routes for making changes depending on what needs to be corrected, with some changes available through online services and others requiring the taxpayer to contact HMRC.
What should you check before registering?
If you think you are within the MTD rules, it is worth checking your position rather than waiting for an automatic notification.
Start by looking at your Self Assessment records and considering whether your income sources are still correct.
You should establish:
Are you required to use MTD?
The rules depend on your qualifying income and circumstances. Not everyone who submits a Self Assessment tax return will automatically fall within MTD.
Is HMRC’s information accurate?
If your business or property income has changed since your previous tax return, make sure you understand what information HMRC is using and whether it still reflects your circumstances.
Do you have suitable MTD software?
MTD for Income Tax requires compatible software to keep digital records and send quarterly updates to HMRC. HMRC does not provide the software itself, so taxpayers need to choose an appropriate solution.
Are you prepared for the reporting deadlines?
The first quarterly update for 2026/27 was due on 7 August 2026. The next is due on 7 November 2026, followed by 7 February 2027 and 7 May 2027.
Anyone signing up partway through the tax year also needs to catch up with their digital record keeping from the beginning of the relevant tax year before submitting their first quarterly update.
What happens if HMRC automatically signs you up?
If HMRC signs you up, you should receive confirmation after the registration has taken place.
At that point, it is important to check that the information being used for your MTD obligations is correct.
In particular, check:
- Which income sources HMRC has recorded
- Whether those income sources are still active
- Whether the information reflects your current circumstances
- Whether you are actually required to use MTD
- Whether you have an appropriate MTD-compatible software package
- Whether you need to catch up on digital records or quarterly updates
If something is wrong, you may be able to update the information through your HMRC online services account or may need to contact HMRC, depending on what needs changing.
Taking action promptly could help prevent an incorrect or outdated record from creating further complications later in the tax year.
Are there penalties for getting it wrong?
HMRC has introduced a more gradual approach to penalties during the first year of MTD for Income Tax.
For the 2026/27 tax year, HMRC has confirmed that penalty points will not be issued for late quarterly updates. However, taxpayers still need to understand their obligations, and this should not be interpreted as a reason to ignore the deadlines.
From the 2027/28 tax year, the points-based penalty system will apply to late quarterly updates. Four penalty points will generally result in a £200 penalty, with further penalties possible if deadlines continue to be missed.
Late Self Assessment tax returns and late payment of tax can also result in separate penalties.
Don’t wait for HMRC to do it for you
HMRC’s automatic sign-up process is intended to bring taxpayers who should be using Making Tax Digital into the system.
However, automatic registration is based on information HMRC already holds, and this may not reflect more recent changes to a taxpayer’s circumstances.
If you think you are affected, checking your position, making sure your information is accurate and choosing your MTD software now could put you in a much better position than waiting for an HMRC notification.
With the rollout continuing and the income threshold set to fall again in 2027 and 2028, Making Tax Digital is becoming an increasingly important part of managing UK tax affairs.
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