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800,000 UK Taxpayers Are About to Miss the MTD Deadline. Here’s How to Avoid Being One of Them
HMRC’s own figures paint a stark picture: with Making Tax Digital for Income Tax becoming mandatory on 6 April 2026, barely 1 in 10 affected taxpayers has actually registered. That leaves approximately 800,000 sole traders and landlords scrambling to comply with the biggest change to UK income tax reporting in over 30 years.
If you’re self-employed or earn income from property, this article breaks down exactly who is affected, what you need to do, and how the new penalty system works, so you can get compliant before the deadline hits.
Who’s Affected by Making Tax Digital for Income Tax?
MTD for Income Tax applies to individuals whose combined gross income from self-employment and/or property exceeded £50,000 for the 2024/25 tax year. This first cohort must comply from 6 April 2026.
A critical point many people miss: the threshold is measured against gross income, that’s turnover, not profit. You cannot deduct expenses before measuring against the £50,000 mark.
Example:
A sole trader invoicing £38,000 who also earns £15,000 in rental income has qualifying income of £53,000. They are in scope for MTD, even though their net profit after expenses may be well below £50,000.
If you have multiple income sources (for example, a sole trade plus one or more rental properties), each source requires its own quarterly update. A sole trader who is also a landlord would need to submit eight quarterly updates per year.
Who Is NOT Currently Affected?
Limited companies, partnerships, and LLPs are not yet within scope. Individuals with qualifying income below £50,000 are also excluded from this first cohort, but those earning over £30,000 will be brought in from April 2027.
What You Need to Do: Step by Step
1. Check your eligibility
Review your 2024/25 Self Assessment return. If your combined gross self-employment and property income exceeds £50,000, you’re in scope.
2. Gather your details
You’ll need your Government Gateway user ID and password, your UTR (Unique Taxpayer Reference), your National Insurance number, and your business and/or property details.
3. Sign up on GOV.UK
Go to the GOV.UK MTD sign-up page, sign in with Government Gateway, select “Making Tax Digital for Income Tax,” and follow the on-screen steps to add your income sources and confirm your accounting period.
4. Choose HMRC-recognised software
You’ll need compatible software to keep digital records and submit your quarterly updates to HMRC. There are a range of options available, from full cloud accounting packages to bridging software that connects your existing spreadsheet to HMRC. Your accountant can advise on the best fit for your situation.
5. Connect your software to HMRC
Once registered and set up, authorise your software to communicate with HMRC on your behalf. This completes the digital link.
6. Start keeping digital records from 6 April
Your first quarterly update covers 6 April to 5 July 2026 and must be submitted by 7 August 2026. From this point on, you’ll submit four quarterly updates and one End of Period Statement per year.
The Soft Landing: What It Does and Doesn’t Cover
HMRC has confirmed there will be no penalty points for late quarterly updates during the 2026/27 tax year. This “soft landing” is welcome news, but it’s widely misunderstood.
What the soft landing covers:
No penalty points for late quarterly submissions in Year 1. This gives you breathing room to settle into the new rhythm of quarterly reporting.
What it doesn’t cover:
Registration is still expected from April 6. You are still legally required to keep digital records from that date. Late filing of your End of Period Statement or final declaration can still attract penalties. And from April 2027, the full penalty regime kicks in with no grace period.
How the Penalty System Works (From April 2027)
The new system is points-based: one penalty point for each late quarterly submission. Once you accumulate four points, you receive a £200 fine, and every subsequent late submission triggers another £200. Points only reset once you’re fully up to date with all submissions.
On top of this, there are separate late payment penalties that escalate the longer you leave an outstanding balance.
Don’t Be One of the 800,000
The registration process takes around 30 minutes if you do it yourself, or 2 minutes if you authorize us as your acting agent. The cost of ignoring it, in penalties, stress, and lost visibility over your finances, is far greater.
At The Tax Guys, we’re helping sole traders and landlords register, choose the right software, and file their quarterly updates so you stay compliant without the stress.