The first quarterly filing deadline for MTD for Income Tax passed on 7 August, with 864,000 sole traders and landlords earning over £50,000 a year set to have signed up and completed the filing.
However, this has quickly proven not to be the case and HMRC has been left scrambling to find a way to get all eligible individuals to sign up and file before the looming 7 November deadline.
What happened with the first MTD filing?
It was expected that 864,000 sole traders and landlords earning over the £50,000 threshold would sign up and complete the first quarterly MTD filing ahead of the 7 August deadline.
However, only 570,000 eligible people registered before the first filing deadline, meaning that there are still nearly 300,000 people who did not register at all.
Out of the 570,000 people who are registered, 23 per cent of people failed to complete their first update, that is, 134,000 people.
The reasoning behind the slow uptake is varied. However, many people believe that it is because there are no penalties in the 2026/2027 tax year for missed filing deadlines.
It is still crucial that sole traders and landlords complete their end-of-year filings. The ‘soft launch’ for MTD only applies to the quarterly filings. If the end-of-year filing is missed, people will still receive penalty points.
What has HMRC done to change this?
In light of the slow uptake of MTD for Income Tax, HMRC has come up with a new initiative to get people to sign up for MTD.
The initiative is that HMRC will automatically sign all eligible taxpayers up for MTD from September 2026 who haven’t done so themselves already.
The decision to begin enrolling people is reinforcing that MTD is here to stay and that compliance with the scheme is not optional.
This will not happen all at once. HMRC will be signing people up in stages across the coming months.
It is expected that further updates will be published throughout August explaining what to do if you receive a letter about being signed up.
This will then trickle down as the eligibility criteria changes from £50,000 to £30,000 in April 2027.
How could auto-enrolment pose a risk?
While it may seem like a positive to not have to register yourself, letting HMRC handle the sign-up could pose a risk to businesses.
Some risks include:
- No choice about software – When people sign themselves up, they have the time to choose the best software plan for their business needs. However, if HMRC sign you up, you will be under strict time constraints to choose software that meets your needs.
- Incorrect details – The automated process relies on previous data from past returns. Should people register on their own terms, they can ensure that their MTD account is ready by day one.
How can we help?
Individuals need to remember that MTD is here to help them. It is simplifying the tax system to ensure compliance and make end-of-year returns easier.
Sole traders and landlords must sign up before HMRC does it for them to mitigate the risks associated with auto-enrolment.
We understand that MTD can be confusing for people to understand, but we are here to help with that.
We can help with enrolment, and after that we can ensure you are using compliant software and help with staying on top of filing deadlines.
For support with MTD, get in touch with our team today!
