Last Updated on September 19, 2026
A letter is on its way to a large number of UK sole traders and landlords. It says HMRC has signed you up for Making Tax Digital for Income Tax. You did not ask for it. You do not get to decline it.
Most people who get that letter will read it as a software problem. Buy something, plug it in, carry on. That is the expensive reading, and it is the wrong one.
What actually changed
Making Tax Digital for Income Tax became mandatory on 6 April 2026 for sole traders and landlords whose qualifying income was over £50,000 in the 2024 to 2025 tax year. If you are in scope you keep digital records and send a short summary of income and expenses every three months through compatible software. It is not a tax return. It is a summary.
Plenty of people in scope did nothing about it. So from September 2026, HMRC started signing them up regardless. Its guidance is direct: if you need to use the service for 2026 to 2027 and have not signed up, HMRC will do it for you. It is happening in stages, and you get contacted after it has been done, not before.
In August HMRC said more than 570,000 people had signed up, and more than 436,000 had sent a first quarterly update. It has not published how many are left to be swept in. If you see a precise figure for that group somewhere, it is arithmetic someone did on the back of those two numbers, not something HMRC has stated. We are not printing one either.
The part almost nobody has checked
Here is where it costs money. When HMRC signs you up, it uses the information it already holds about you. That comes from your 2024 to 2025 tax return, plus your 2025 to 2026 return if you filed it before the sign-up happened. Anything that changed after that is not in there.
Started a second trade. Took on a rental. Closed something down. Changed how the business is structured. None of it is reflected. HMRC signs up a version of your business that is at least a year old, and correcting it becomes your job, after the fact, with quarterly updates already running.
| You sign yourself up | HMRC signs you up |
|---|---|
| Your income sources are right from day one | HMRC uses your last return, you correct it afterwards |
| You compare software and pick on price and fit | You buy under time pressure, from a letter |
| You choose when to start and get set up first | A quarterly update may already be overdue |
| Your details describe the business you run now | Your details describe the business you ran in 2024 to 2025 |
The penalty position, said plainly
You will not get penalty points for a late quarterly update in the 2026 to 2027 tax year. That is real breathing room, and it is the thing most of the panic selling around this leaves out.
What has not been relaxed: the 31 January tax return deadline still carries penalty points, and late payment penalties still apply. From 6 April 2027 the quarterly deadlines start carrying points as well, one point per missed deadline, with a £200 fixed penalty once you reach four. April 2027 also drops the threshold to qualifying income over £30,000, which pulls in a far bigger group of people who are not watching this at all yet.
The five minute check
Sign in to HMRC online services. If a message tells you that you are already signed up, you are in the system and the clock has been running since April. If there is no message, you have not been signed up yet, and you can still do this on your own terms instead of a letter’s.
What to do this week
1. Look, do not assume. Sign in to HMRC online services and check whether you have been signed up. Five minutes settles a question you are currently guessing at.
2. Correct the record. Confirm the income sources HMRC thinks you have, add anything new since your last return, and tell them what has stopped. This is the step that actually protects you, and it is the one people skip because it is boring.
3. Choose software deliberately. HMRC does not supply it, and there are free options alongside paid ones. Read our breakdown of what FreeAgent costs and who gets it free before you agree to a subscription, and check it against our index of what UK small firms actually waste on software. A deadline is the worst possible moment to buy a tool you will pay for monthly for years.
4. If you are out of scope, say so. Exemptions exist, including for digital exclusion. If you have been signed up and you do not believe you need the service, that is a phone call, not a shrug.
The takeaway
This is not a software story. It is a records story wearing software clothing. HMRC is about to act on the version of your business it holds, and for most people that version has not been looked at since they filed a return eighteen months ago. The same thing is true of your Companies House record and your confirmation statement date, which almost nobody checks until something forces them to.
Structure before scale. Fix what the state thinks you are before you spend another pound on what customers think you are.
