HMRC alert as thousands face automatic move onto new tax system from September – act now

From September 2026, the tax authority will begin automatically signing up sole traders and landlords who should already be using Making Tax Digital (MTD) for Income Tax but have so far failed to register.

The process will be carried out in stages over the coming months.

More than 436,000 people have already sent their first quarterly update under the new system, while over 570,000 have signed up to the service in total.

However, roughly a third of those who should have been registered since April this year have still not done so.

Since April 2026, sole traders and landlords with earnings above £50,000 from self-employment and property have been legally required to maintain digital records and submit quarterly updates to HMRC.

These updates are not tax returns; they are brief summaries sent through compatible software that take only minutes to complete.

The traditional Self Assessment deadline of 31 January remains unchanged, and quarterly updates do not replace it.

During this first year of the scheme, no penalty points are being issued for late quarterly submissions. Those who have yet to file their first update can still do so now through their chosen software.

Craig Ogilvie, HMRC’s Director of Making Tax Digital, said: “If you haven’t yet signed up, now is the time to do so. Taking action now means you stay in control, can make sure your Making Tax Digital for Income Tax details are correct from the start, and have time to choose the software that works best for you, rather than waiting for HMRC to sign you up from September.”

Fresh guidance is expected in late August explaining what people should do if they receive a letter from HMRC about being automatically enrolled.

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Tax experts have warned that HMRC’s decision to begin enrolling people automatically sends a strong signal that MTD is not something taxpayers can choose to ignore.

Emma Rawson, Director of Public Policy for the Association of Taxation Technicians, said: “HMRC’s decision to begin signing up taxpayers who should already be in Making Tax Digital (MTD) sends a clear message that MTD is not optional.”

Ms Rawson cautioned that those enrolled by HMRC should not assume everything has been sorted on their behalf, urging them to check their records are correct, particularly if their business has closed or their circumstances have changed.

Victoria Todd, Head of the Chartered Institute of Taxation’s Low Incomes Tax Reform Group, said: “Automatically signing up taxpayers from September is an opportunity for HMRC to give these taxpayers some extra support. But HMRC also need to understand what the barriers have been that have prevented them from signing up before now.”

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Ms Todd noted that around one million additional taxpayers, including 400,000 without professional tax advice, will need to register by next April when the income threshold drops from £50,000 to £30,000.

Ellen Milner, Director of Public Policy for the Chartered Institute of Taxation, warned that the absence of penalties this year should not breed complacency.

Ms Milner said: “Some taxpayers may have put off filing their first quarterly update because late filing penalties have been waived, but they cannot turn a blind eye to them forever.”

She stressed that quarterly updates must be completed before taxpayers can file their end-of-year tax return, and that failing to keep proper digital records could still lead to fines of up to £3,000.

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Ms Milner added: “Taxpayers should use this period to establish good digital record-keeping habits, become familiar with MTD-compatible software and get their quarterly submissions sent to HMRC ahead of their year end tax return.”

Anyone wishing to sign up voluntarily can do so through GOV.UK, where HMRC guidance and support is available.