HMRC has announced that, from September 2026, it will begin to sign up taxpayers to MTD income tax where: 

• HMRC believes the taxpayer is within scope of MTD income tax from April 2026. A taxpayer must use MTD income tax from April 2026 onwards where their combined gross income for 2024/25 from any sole trades and property businesses carried on exceeds £50,000. Exemptions apply, some of which require the taxpayer to make a claim to HMRC; and
• the taxpayer has not yet signed up to MTD income tax. It will remain possible for taxpayers to sign up for MTD income tax, and for agents to sign up their clients, until HMRC intervenes and signs the taxpayer up directly. 

Timetable for HMRC sign-ups 

HMRC plans to sign up taxpayers in batches from September 2026 onwards, pausing activity around the income tax self assessment tax return filing date (31 January 2027). It is estimated that up to 294,000 taxpayers could be affected. 

Process for HMRC sign-ups 

Once HMRC has signed up a taxpayer, it will write to the taxpayer: 

• reminding them that, under MTD income tax, they are required to use compatible software to:
  • create and store digital records for their MTD sources of income;
  • send summaries of those digital records – quarterly updates – to HMRC; and
  • submit an end-of-year tax return; and
• asking the taxpayer to:
• access their HMRC online services and check that their MTD income tax details are correct. The letter also provides guidance on the action to take where the taxpayer does not believe that they are within scope of MTD income tax from April 2026;
• choose software that is compatible with MTD income tax; and
• catch up on any quarterly updates they have missed. The first quarterly update for 2026/27 was due for submission by 7 August 2026. 

The taxpayer is also reminded that they will need to submit their tax return for 2025/26 through the existing ITSA system by 31 January 2027.  

Agents will not receive copies of letters sent to their clients.  

Penalties for late quarterly updates 

Under the new penalty regime applying for MTD income tax, the taxpayer is awarded a penalty point where a quarterly update is submitted late. A £200 penalty is applied once a taxpayer receives four points. However, no penalty points will be awarded for late quarterly updates in 2026/27. ICAEW has published a helpsheet explaining the new penalty regime in greater detail.