The first quarterly deadline for Making Tax Digital (MTD) for Income Tax arrived on 7 August.
It was anticipated that around 864,000 sole traders and landlords with annual earnings above £50,000 would have registered for the scheme and completed their first quarterly update.
However, the figures have fallen short of expectations. HMRC is now having to take further steps to encourage those who have not yet registered to get involved before the next quarterly deadline on 7 November.
Before the 7 August deadline, HMRC expected around 864,000 sole traders and landlords earning more than £50,000 to be registered and ready to submit their first quarterly update.
The actual number was considerably lower, with just 570,000 eligible individuals registering ahead of the deadline. This means almost 300,000 people who were expected to join the scheme had not registered.
Registration was not the only issue. Of the 570,000 people who had signed up, 23 per cent did not submit their first update. That means approximately 134,000 registered taxpayers failed to complete their first quarterly filing.
There are a number of reasons why MTD has had a slower start than expected. One possible explanation is the absence of penalties for missed quarterly deadlines during the 2026/2027 tax year.
However, taxpayers should not assume that all MTD deadlines are penalty-free. The ‘soft launch’ only relates to the quarterly updates. End-of-year obligations still apply and missing an end-of-year filing can result in penalty points.
With fewer people registering than expected, HMRC has decided to take a more proactive approach to getting taxpayers onto the MTD system.
From September 2026, HMRC will start automatically enrolling eligible taxpayers who have not already registered themselves.
This is another indication that MTD is becoming a permanent part of the tax system. For those who fall within the eligibility requirements, signing up is not something that can simply be avoided.
The automatic enrolment process will be introduced gradually rather than happening in one go. HMRC will bring different groups into the scheme over the coming months.
More information is expected to be provided throughout August for anyone who receives a letter confirming that they are being automatically enrolled.
The number of people affected will also increase as the income threshold is reduced. From April 2027, the threshold will fall from £50,000 to £30,000.
Automatic registration might sound convenient, particularly for anyone who has not yet got around to signing up. However, there are some potential drawbacks to leaving the process entirely in HMRC’s hands.
A couple of areas to be aware of include:
MTD is intended to make managing your tax affairs more straightforward. By keeping financial information updated throughout the year, the system is designed to make staying compliant and completing your end-of-year tax return easier.
If you are a sole trader or landlord who falls within the current threshold, it makes sense to register before HMRC does it for you. Getting everything sorted early gives you greater control over the process and reduces the chance of being caught out later.
We know that understanding MTD and keeping up with the changing requirements can feel complicated. That is where our team can step in.
We can help you register for MTD, find suitable compliant software and keep track of your quarterly and end-of-year filing responsibilities.
Need help getting ready for MTD? Get in touch with our team today!
