It’s the biggest pain in decades, not to mention a quintupling of accountancy costs (unless you do it yourself, which we’re trying, and FreeAgent may well advocate, possibly helping overcrowded prison numbers as tens of thousands of numerically illiterate freelancers find themselves the wrong side of HMRC), but with thousands of sole traders, landlords and small business owners set to be automatically signed up to Making Tax Digital (MTD) for Income Tax by HMRC this month, Scottish accounting software specialist FreeAgent is urging those affected to act now to avoid falling behind on the new quarterly reporting requirements.
MTD for Income tax is mandatory now for those earning more than £50,000 in qualifying self-employed and property income, with lower incomes due to be dragged in moving forwards. From this month, HMRC will begin automatically signing up those required to use the system for the 2026/27 tax year who have not yet registered.
For those affected, the first step will be to look out for correspondence from HMRC. Anyone who HMRC has signed up will receive a letter or digital message asking them to complete a ‘checking step’, confirming that the information HMRC holds about them is correct and providing an opportunity to flag any changes.
They will then need to choose and register with MTD-compatible accounting software, such as FreeAgent. This can connect with business bank accounts, helping to keep digital records up to date and making it easier to prepare and submit the required quarterly updates. Those working with an accountant or bookkeeper can also ask them to help get everything set up correctly.
Anyone who has already missed their first quarterly update will need to act quickly to get back on track ahead of the next deadline on November 7th. Getting the right software and records in place now will make it easier to meet future HMRC reporting requirements and reduce the risk of future penalties.
Jon Martingale (pictured), head of product management and MTD expert at FreeAgent, said: “Making Tax Digital for Income Tax represents a significant change for sole traders, freelancers, small business owners and landlords, and it’s understandable that some people may still be getting to grips with what the new rules mean for them. HMRC’s automatic signup process will now bring those who are eligible but haven’t yet signed up into the system.
“MTD for Income Tax is a legal requirement, so it’s important that those affected understand what they need to do next and get themselves on track for future deadlines. While it might feel like another thing to add to the to-do list, with the right software and support in place, managing the new requirements can be surprisingly straightforward.”
From next year, MTD for Income Tax will also apply to sole traders and landlords who earned qualifying income of £30,000 and more in the tax year 2025/26, and £20,000 a year later, so FreeAgent is also urging those who will be affected to get up to speed on the system early to avoid incurring any penalties in the future, as HMRC are traditionally not someone you can argue with further down the line.
