Automatic MTD sign-up – Introduction
HMRC has fired a warning shot across the bows of hundreds of thousands of taxpayers this September: if you haven’t signed up for Making Tax Digital for Income Tax, the Revenue will do it for you.
Whether you like it or not.
The announcement, made in mid-August but taking effect from September 2026, marks a significant escalation in HMRC’s enforcement approach.
Rather than continuing to cajole, remind, and nudge recalcitrant taxpayers towards digital compliance, the department has decided that if the mountain won’t come to Muhammad… Muhammad will simply enrol the mountain automatically.
The Scope of the Problem
Making Tax Digital for Income Tax Self-Assessment (MTD for ITSA) became mandatory from 6 April 2026 for sole traders and landlords with qualifying income exceeding £50,000, based on their 2024-25 tax returns.
HMRC initially reported that over 436,000 taxpayers had successfully filed their first quarterly digital updates… a figure the department was keen to trumpet as evidence of successful implementation.
However, the flip side of that statistic tells a different story.
An estimated 294,000 taxpayers who should have registered for MTD by now have failed to do so.
That’s roughly one in three of those within scope.
Whether through ignorance, obstinacy, or simple inertia, a substantial proportion of the self-employed population has been sitting on its hands.
What Automatic Sign-Up Means in Practice
From September 2026, HMRC will begin the process of compulsorily enrolling non-compliant taxpayers into the MTD system.
The department has indicated this will happen “in stages”, presumably to avoid overwhelming both its own systems and the support infrastructure that will inevitably be required when tens of thousands of taxpayers suddenly discover they’re expected to use software they’ve never installed.
Once automatically signed up, taxpayers will be required to:
- Maintain digital records using MTD-compatible software
- Submit quarterly updates of income and expenses to HMRC
- Provide an End of Period Statement (EPOS) after the end of each accounting period
- Submit a Final Declaration to finalise their tax position
The first quarterly update for the 2026-27 tax year was due by 7 August 2026 for those with a standard April-to-April accounting period.
Anyone who missed that deadline, including those about to be forcibly enrolled, faces the prospect of playing catch-up whilst simultaneously learning new systems.
The Legal Framework
HMRC’s power to require digital record-keeping and submission derives from sections 60 and 61 of the Finance (No. 2) Act 2017, which inserted new provisions into the Taxes Management Act 1970.
These provisions allow HMRC to make regulations requiring taxpayers to use electronic communications for the purpose of providing information.
The Income Tax (Digital Requirements) Regulations 2021, as subsequently amended, set out the detailed requirements for MTD for ITSA.
Notably, the regulations impose obligations on “relevant persons” to keep and preserve digital records and to provide information to HMRC using compatible software.
What’s less clear is the precise legal mechanism by which HMRC can simply “sign up” taxpayers without their active participation.
In practice, this appears to involve HMRC creating an MTD account on the taxpayer’s behalf and notifying them accordingly. The taxpayer then has obligations under the regulations regardless of whether they chose to engage with the system voluntarily.
Penalties: The Stick Behind the Carrot
HMRC’s guidance has been notably quiet on the precise penalty regime for those who fail to comply with MTD requirements, but the legal framework provides for a points-based penalty system.
Under Schedule 24 to the Finance Act 2021, late submission of MTD returns attracts penalty points, with escalating financial penalties once a threshold is reached.
For quarterly submissions, a taxpayer can accumulate up to four penalty points before incurring a £200 penalty. After that point, every subsequent late submission triggers another £200 penalty.
The points expire after a period of compliance, 24 months for quarterly returns, but the ratchet mechanism means serial non-compliers will face mounting costs.
Perhaps more significantly, those who fail to keep proper digital records at all face penalties under section 12B TMA 1970 of up to £3,000 per tax year. Whether HMRC will actually pursue such penalties against the newly enrolled remains to be seen, but the legal tools are certainly available.
Practical Implications for Practitioners
For tax advisers and accountants, the automatic sign-up programme creates both challenges and opportunities.
Clients who have been dragging their feet will need urgent assistance to get compliant, and there will inevitably be a cohort who only discover their MTD obligations when they receive HMRC’s letter confirming their automatic enrolment.
Practitioners should be particularly alert to:
- Client communication: Proactively contacting clients within the £50,000+ threshold who haven’t yet engaged with MTD
- Software readiness: Ensuring appropriate software is in place and that clients understand how to use it (or that the practice will handle submissions on their behalf)
- Catch-up compliance: Helping clients who’ve missed earlier quarterly deadlines to get their records in order
- Agent authorisation: Ensuring that agent-client links are properly established within HMRC’s systems before the automatic sign-up process potentially complicates matters
The Bigger Picture
HMRC’s willingness to move from voluntary to compulsory enrolment reflects a broader shift in the department’s approach to digital transformation. The years of consultation, pilot programmes, and soft launches are over.
MTD is now simply the way things are done, and taxpayers who won’t embrace it voluntarily will be embraced by it involuntarily.
There’s a certain inevitability about this.
The £50,000 threshold is only the first phase, from April 2027, the threshold drops to £30,000, and there are strong indications that further extensions will follow.
For most self-employed individuals and landlords, quarterly digital reporting is not a matter of if, but when.
The automatic sign-up programme also serves as a warning shot for future compliance initiatives.
If HMRC is prepared to forcibly enrol taxpayers into MTD, what other digital obligations might follow the same path?
The proposed expansion of third-party data sharing, on interest income, card sales, and more, suggests a future where the Revenue knows more about taxpayers’ affairs than the taxpayers themselves.
For now, the message from HMRC is clear: Making Tax Digital is not optional. And if you haven’t made it yourself, they’ll make it for you.