HMRC to enrol the unregistered self-employed into Making Tax Digital from September
HMRC will start signing up sole traders and landlords to Making Tax Digital for Income Tax on their behalf from September, five months after the system became mandatory for them and with roughly a third of those required to use it still not registered.
The rules took effect on 6 April for self-employed businesses and landlords with qualifying income above £50,000 in the 2024-25 tax year. HMRC's own estimate was that around 864,000 people fell within the first wave. Those who have not signed up themselves will now be enrolled automatically, in stages over the coming months, using the information HMRC already holds about their income sources.
What automatic enrolment means
Enrolment does not by itself change what the taxpayer must do. The obligation, from April, was to keep digital records and to send quarterly updates through compatible software, with a final declaration replacing the annual return. Someone who is enrolled without having chosen software will be in the system but unable to comply with it, which is the point HMRC is making: registration was the easy part, and it has been left undone.
Accountants have raised a practical concern. HMRC's records may not reflect a recent change in circumstances: a business closed, a property sold, income that has fallen below the threshold. Newby Castleman, a Leicester practice, advised clients in a note on 24 August to make sure their income sources on HMRC's systems are up to date before enrolment reaches them, because an incorrect record will produce an incorrect obligation.
No penalties this year
HMRC has said it will not charge penalties for missed quarterly updates in 2026-27, the first year of the regime. That is a concession, not a suspension. The legal requirement to use the system stands, the quarterly deadlines stand, and the penalty regime for late submissions starts in the second year with a points-based system that accumulates towards a fine.
The threshold falls next. Those with qualifying income above £30,000 join from April 2027 and those above £20,000 from April 2028. Qualifying income means gross turnover and rental income before expenses, not profit, which is why the Freelancer and Contractor Services Association asked in its Budget submission last week for the threshold to be frozen at £50,000. A sole trader turning over £25,000 with modest profits will be keeping digital records and filing quarterly from 2028 on the current timetable.
For contractors
The limited company contractor is not in scope. Making Tax Digital for Income Tax applies to self-employment and property income, and a director taking salary and dividends from a company reports those through Self Assessment as before. Making Tax Digital for corporation tax, which would bring companies into the quarterly regime, has no start date.
The sole-trader contractor, the consultant with a rental property alongside a company, and anyone who left a company for self-employment after the 2021 off-payroll reform are all inside. For them the question this month is not whether to register but whether the software is in place before HMRC does it for them.