Making Tax Digital for Income Tax: HMRC signs you up itself

Most of the worry about Making Tax Digital goes into choosing software. What catches people is the test for being in scope. It looks at gross income — turnover, before a single expense comes off — and adds self-employment to property income. A decorator on thin margins who also lets out a flat can be well inside the rules while the profit looks small. Nothing in the test asks what you took home.

The second surprise: you no longer have to volunteer. Since September 2026, HMRC has been signing up people in scope who have not signed up themselves, using only the information it already holds: the last return you filed, the last address you gave it. Close a business, sell a property or start a new trade since, and the picture it signs you up with is out of date. Correcting it is your job.

It is gross income, and the deciding return is already filed

HMRC uses the qualifying income on the return you filed in the January before the tax year starts — the one covering the year that ended the previous April. For the year that began in April 2026, that is the 2024 to 2025 return. So you can already know, because the year the figure comes from has ended. If the return is filed, the number is in your Self Assessment record; if not, it is in your own books. Either way it will not change.

What counts: self-employment turnover, UK and foreign property income, and your share of jointly owned property — your share, not the whole rent. What does not count: employment income taxed through PAYE, pensions, dividends, bank interest, and a share of partnership profits. HMRC's guidance on working out your qualifying income holds the current threshold, which steps down in stages, so the same figures can leave you out of scope one year and in it the next.

Nothing new is being taxed. The filing route changes.

What changes is the plumbing: records kept digitally as you go, a summary sent to HMRC every three months, and one tax return at year end, submitted through software rather than typed into HMRC's online form. There is no extra bill and no extra payment date: the January deadline and payments on account are untouched.

That last detail is the one people underestimate. If you have filed your own return on gov.uk every January, or a relative has filed it for you, that route closes: the return must come out of compatible software. Spreadsheets still work, but only with bridging software that moves the figures by a digital link — an exported file or a linked cell, not retyping or copy and paste.

Quarterly updates are cumulative, and that is the good news

Each update covers the tax year to date, not the three months just gone. Miscategorise something in the first quarter and you fix it in your records; the next update carries the corrected year-to-date total. That is why there is no amendment process for a quarterly update. The exception is the final quarter: nothing comes after it to carry a correction, so that update is resent if the records change.

They are summaries, not mini returns: totals per income and expense category. No capital allowances, no private-use adjustments, no reliefs — those happen once, at the end, before the return. The deadline falls a month and a week after each period closes, and if you keep your books to calendar month ends you can elect quarters ending on the last day of the month rather than the fifth, chosen in your software before your first update. HMRC's page on quarterly updates has the dates.

Your records have to start when the tax year started

This is where automatic sign-up bites: the obligation runs from the start of the tax year, not from the day the letter arrives. Find out in autumn that you are in it, and the records from April onward still have to exist — a date, an amount and a category for each transaction, entered close to the time it happened. Reconstructing six months of those from a bag of receipts is the most expensive week of anybody's year.

There is a relaxation for smaller businesses: below a turnover figure HMRC publishes — measured per income source — transactions can be recorded simply as income or expense rather than categorised. The requirement to have them does not relax.

Sole traders and landlords first; partnerships and companies are not in it

The direction of travel is settled even if the schedule is not: lower thresholds, more people, each group brought in on a return already filed. Partnerships and limited companies sit outside it, with no start date in force for either; a date you read for corporation tax is a plan, not law. An exemption exists for people who genuinely cannot work digitally — age, disability, no usable internet where they live — but it is granted, not claimed: you apply, HMRC decides, and it may be temporary. No letter does not mean no obligation, so check your own position rather than waiting for post.

The mistake that costs the most

A missed quarterly update is not the worst of it, but it is no longer free. Quarterly updates carried no late-submission penalty in the first year of the regime, the year that began in April 2026 — a one-off, not something each new group gets. For later years a missed update earns a penalty point just as a missed return does, and points accumulate to a fixed penalty. Return and payment deadlines never moved. The costlier mistake is choosing software in the week your first update falls due, because the real decision is not the software. It is whether your bank feed, your invoicing and your bookkeeping end up in one system that can also file, or three that cannot talk. Reversing that mid-year means re-entering a year of transactions. Decide before April, not in August.

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This is general information about how a process works, not advice about your situation. Thresholds, fees and deadlines change — check the official source linked above for the current figures, or ask a professional who can see your circumstances.