The latest Making Tax Digital update affects sole traders and landlords who should already be using the system, as well as those due to join from April 2027. HMRC will begin signing up some taxpayers who have not yet done so themselves, while exemption applications are now open for eligible people joining next year.
Sole traders and landlords with qualifying income over £50,000 should already be using Making Tax Digital (MTD) for Income Tax for the 2026/27 tax year, unless they qualify for an exemption.
They should also have submitted their first quarterly update. However, of the 864,000 taxpayers estimated to be within scope, more than 570,000 have signed up and just over 436,000 have successfully submitted their first quarterly update.
What the Making Tax Digital update means now
HMRC has decided to start signing up taxpayers it believes should be using MTD for 2026/27 but have not yet registered themselves.
Those signed up by HMRC will receive either a letter or a digital message, depending on their contact preferences. This will explain the next steps they need to take, including obtaining and using MTD-compatible software.
Although HMRC will not issue penalty points for late quarterly updates during 2026/27, taxpayers who are within scope still need to meet their MTD requirements. The absence of penalty points during the first year does not make MTD optional.
Exemption applications are now open
Looking ahead, the next group of taxpayers will come within MTD from 6 April 2027.
Sole traders and landlords with qualifying income above £30,000 and up to £50,000 for 2025/26 will need to use MTD from that date unless they qualify for an exemption.
HMRC has now opened exemption applications for taxpayers due to join from April 2027. Someone may qualify as digitally excluded where it is not reasonable for them to use digital tools to meet their MTD obligations.
Reasons can include:
- Internet access: There is no internet access at the person’s home or business because of their location, and suitable access is not available elsewhere.
- Age, health or disability: Their age, health condition or disability prevents them from using a computer, tablet or smartphone to keep digital records or submit information to HMRC.
- Religious reasons: They are a practising member of a religious society or order whose beliefs are incompatible with using computers, tablets or smartphones for business or personal use.
However, additional costs or the extra time involved in complying with MTD are not, on their own, valid reasons for HMRC to grant an exemption.
HMRC guidance provides further information on Making Tax Digital exemptions and how to apply.