HMRC have just announced that they are starting a mandatory signing-up campaign aimed at those taxpayers who should have joined MTD (Making Tax Digital) in April 2026, but haven’t yet done so. The question is, what this means in practice, and what, if anything, do taxpayers need to do right now.
The news on registrations thusfar
HMRC have previously announced they anticipate approximately 865,000 taxpayers being obliged to join MTD for income tax from April 2026.The first MTD for income tax quarterly update filing deadline of 7th August has now passed, but HMRC is not letting the dust settle on compliance.
Statistics published on 28th August show that just under 600,000 had done so, with around 450,000 or 75% of them successfully filing quarterly updates thusfar. In the same announcement, HMRC has said that whilst it is pleased with these figures, it is not going to wait for the remaining taxpayers to sign themselves up. Instead, starting this month, they will sign up on a mandatory basis, any remaining taxpayers it considers should be in MTD for the 2026/27 tax year.
Why bring in compulsion so early in the tax year?
It was inevitable, given the scale and nature of the change involved in the move to MTD, that not everyone required to register, would have done so right away. It was therefore expected that at some point, HMRC would have to wave the big stick and force anyone who should have registered, but has not done so yet, to sign up. That being said, the timing of introducing compulsory registration so early has come as a surprise.
In MTD for VAT, it was not until November 2022 that the old way of submitting VAT returns was stopped; this was despite the change being introduced over three years’ earlier in April 2019. So why the move now? HMRC is obviously keen to get across the message that MTD is not optional, especially since there is an amnesty for penalty points for the non-submission of quarterly returns for the current tax year.
Arguably, signing taxpayers up early also gives them more time to get to grips with MTD before they are required to file their first tax return under the new system. However, there are risks in moving to compulsory registration so early. In particular, those taxpayers required to join from April 2027 or 2028 may be less inclined to sign themselves up if they think HMRC will just do this for them anyway.
HMRC’s plan of action
HMRC has said that it will sign-up any taxpayer who should have already joined MTD, in stages over the next few months. Once they’ve been signed up, they will receive a letter or digital message advising them what this means and the next steps they need to take. This will include all the usual steps to get ready to use MTD, such as finding compatible software, starting to keep digital records etc.
However, there will also be an additional ‘checking’ step, with taxpayers signed up by HMRC being asked to log into their personal tax account (or asking their accountant to do so) and check that HMRC’s records are up to date. Once logged into the relevant records, their tax account will list those businesses which HMRC believes to be active and within MTD from April 2026.
There will then be the option to either confirm the details are up to date, as some businesses will have ceased trading. This is important, as HMRC’s records are based on historic tax return data, so failure to check might result in HMRC expecting quarterly updates for a business that no longer exists.
Don’t wait for HMRC to contact you
If you are someone who could be affected by this change, you should consider acting now, rather than waiting for HMRC to make its move. HMRC will identify eligible taxpayers, based largely on the information included on your 2024/25 tax return. So, if any changes in circumstances have occurred, such as a change to a partnership/limited company or a cessation of trading, may not yet have been picked up by HMRC.
Similarly, it is possible that you may be eligible for one of the exemptions from MTD, but HMRC is not aware of this. Although many MTD exemptions are automatic, some require an application to HMRC, such as being digitally excluded, So, if you believe you may be eligible for exemption, you should contact HMRC as soon as possible to prevent compulsory registration by the tax office.
If you are not certain of what you should do, ask an accountant, who will advise you of your legal position and can apply for registration on your behalf. The main advantage of this is that it will pre-empt any letters from HMRC and avoid you being put you on the ‘one to watch’ list. If this were to happen, it could significantly increase the possibility of an unwanted tax enquiry into your tax affairs in the future.
The next step
Once a taxpayer has been signed up for MTD, this is just beginning of a period of adjustment. The taxpayer will need to comply with the MTD requirements for 2026/27, including signing up for a HMRC approved digital software package and backdating digital records to the beginning of the tax year.
There is some good news in that, given the cumulative nature of quarterly updates and the lack of penalty points for late filing of them in 2026/27, HMRC has said that there is no requirement to backfile any missing quarterly returns. Instead, the position can be caught up on the next quarterly submission. This does not mean quarterly updates are optional, but for the 2026/27 year, you must have as a minimum, filed the fourth quarterly return for the year.
Was it all really necessary?
HMRC has always stressed the importance of taxpayers signing-up promptly. Their apparent change of policy from encouraging taxpayers to do so, to compulsion, may lead some to question whether it was worth the time signing up earlier this year, and indeed whether the compulsory signing-up will apply next year and the year after.
After all, if HMRC will sign up taxpayers anyway in the end, isn’t it pointless doing it yourself or asking your accountant to do it for you? I would say yes, as there are benefits both to you and your accountant to jump before you’re pushed. For a start you will avoid being placed on the ‘naughty step’ and gives you the opportunity to check that HMRC’s information is correct before joining the club.
Accountant’s view
I must admit that I was rather surprised that HMRC moved to compulsory registration so soon but suspect that it’s all about them getting their ducks in a row before April 2027. This is when the scope of MTD is extended to cover micro and part-time businesses with a gross turnover of over £30k in April 2027 and £20k in April 2028.
If, as I believe, that they will have significantly greater issues with the £30k cohort next year, I strongly suspect that they may well abandon their plans for individuals whose tax returns only show gross income of £20k and minimal taxable profits, but we will just have to wait and see.
