HMRC to automatically bring more landlords into MTD scheme

Landlords and sole traders who are yet to join Making Tax Digital (MTD) for Income Tax may soon find themselves automatically enrolled, with HMRC set to begin registering eligible taxpayers from September.

The move follows the first phase of MTD’s rollout, which became mandatory from April 2026 for individuals with annual qualifying income above £50,000 from self-employment and/or property rental activities.

Strong uptake since launch

According to HMRC, take-up has been encouraging, with hundreds of thousands of taxpayers already using the new digital reporting system with more than half a million taxpayers have joined the service, while over 436,000 first quarterly updates were submitted for the 2026/27 tax year.

HMRC says many users are finding the process straightforward through compatible accounting software and is encouraging anyone who has not yet registered to do so before automatic enrolment begins.

Why acting early matters

Taxpayers who register proactively can check that their details are correct, familiarise themselves with the reporting requirements and choose software that best suits their circumstances.

Those who delay may lose the opportunity to manage the transition at their own pace once HMRC starts bringing eligible taxpayers into the regime automatically.

Relief for late first submissions

The first reporting period for most MTD users covered 6 April to 5 July 2026, with quarterly updates due by 7 August. Taxpayers using calendar quarters were required to report activity from 1 April to 30 June by the same deadline.

While some individuals may have missed their first submission date, HMRC has confirmed that penalty points will not be issued for late quarterly updates during the 2026/27 tax year. Outstanding updates can still be filed through approved software without triggering the new points-based penalty system.

However, taxpayers should note that existing penalties for late tax returns and overdue tax payments remain fully in force.

Further expansion planned

The scope of Making Tax Digital will widen again from April 2027. At that point, landlords and sole traders with qualifying income exceeding £30,000 will also be required to comply with the digital reporting regime.

The government sees MTD as a key part of its plans to modernise the tax system and improve the accuracy of tax records through more frequent digital reporting.

Quarterly updates are not tax returns

One common misconception is that quarterly updates replace the annual Self Assessment return. In reality, the updates simply provide a summary of income and expenses throughout the year.

Taxpayers within the scheme must still complete their year-end obligations and submit their Self Assessment information by the usual 31 January deadline.

Penalties on the horizon

Although HMRC is taking a lighter approach during the first year, the penalty points system is scheduled to apply fully from April 2027. Under the rules, each missed quarterly submission will generate a penalty point. Once a taxpayer accumulates four points, a £200 penalty will be issued, with further fines possible if non-compliance continues.

For landlords and sole traders who have yet to prepare for MTD, now may be the ideal time to review their record-keeping processes and ensure they have suitable software in place before mandatory enrolment expands.

If you have any questions about MTD please get in touch with Tom Young by using the details below.