HMRC Starts Auto-Enrolling Sole Traders and Landlords Into Making Tax Digital: What Happens Next

HMRC has started signing up sole traders and landlords for Making Tax Digital for Income Tax without waiting for them to do it themselves. Roughly 294,000 people who met the criteria to register by the 6 April 2026 start of Phase 1, but hadn't, are being auto-enrolled this September — not all at once, but in waves, with HMRC processing several thousand sign-ups a day using data already on file from 2024/25 Self Assessment returns.

The trigger for auto-enrolment is straightforward in principle and a common source of confusion in practice: gross qualifying income above £50,000 on your 2024/25 return. Gross qualifying income means total turnover from self-employment plus gross rental receipts from property, added together across every business and every property you hold, before a single expense is deducted. It is not the profit figure that ends up on your tax bill.

That distinction catches out a specific, recurring group of landlords in particular. A landlord with £52,000 in gross rent but only £18,000 in net profit after mortgage interest, letting agent fees, repairs and other costs is still in scope for MTD, because the £50,000 test is applied to the rent received, not what's left over. Section 24's restriction on mortgage interest relief — which already stops many landlords deducting finance costs directly from taxable profit — has no bearing on the MTD threshold test either way, since that test never looks at profit in the first place.

The same gross-not-net logic applies to sole traders and to anyone combining self-employment with rental income. A sole trader invoicing £55,000 gross with £22,000 net profit after expenses is in scope on the gross figure alone. Someone running a small trading business generating £35,000 in sales alongside a rental property bringing in £20,000 in gross rent is also in scope, because HMRC aggregates all qualifying income sources for one person together — £55,000 combined — rather than testing each income stream separately against the threshold.

Joint ownership works differently, and it's worth getting right since it can move someone's registration date by a full year. For a jointly owned property, only your own share of the gross rental income counts toward your personal qualifying income — not the property's total receipts. Two people who jointly and equally own a property generating £80,000 a year in gross rent each have a £40,000 qualifying income share, which sits below the £50,000 threshold and keeps both of them out of Phase 1, even though the property's combined rental income clears the threshold several times over.

What HMRC actually does when it auto-enrols someone is create a digital tax record built from the Self Assessment data it already holds — not a blank account waiting for the taxpayer to configure. That matters because the resulting default profile can sit awkwardly with how the person's tax affairs actually work: it won't automatically reflect specialised property management software already in use, and if income splits across multiple sources in ways the legacy return doesn't cleanly capture, the default record can misrepresent the real picture until it's corrected.

The coordination gap that catches people out most is what happens to agent access. If an accountant hasn't already registered a client for MTD themselves, HMRC's auto-enrolment doesn't loop them in — the agent gets no copy of the notification and no automatic signal that their client's status has changed. Anyone who assumed a long-standing accountant relationship meant this was being handled should confirm that directly, rather than assume silence means it's in hand.

HMRC's penalty regime for MTD separates two things that are easy to conflate: late submission of a quarterly update, and late payment of the tax actually owed. The submission side runs on a points-based system — each late quarterly update adds one penalty point, and reaching four points as a quarterly filer triggers a £200 fine, with a further £200 for every subsequent late submission after that. Points reset only after a sustained period of on-time filing, not automatically at the start of a new tax year.

Late-payment interest is a separate and, for most people, more expensive problem, since it runs on any income tax and National Insurance actually owed regardless of whether the quarterly updates themselves were filed on time. Submitting a quarterly update on schedule avoids penalty points, but it does nothing to stop interest accruing on unpaid tax — the two obligations are enforced independently of each other, and staying current on one doesn't excuse the other.

The quarterly update calendar itself is where a lot of confusion has crept in since Phase 1 began, and it's worth being precise about it. The first quarter, covering 6 April to 5 July 2026, carried a submission deadline of 7 August 2026 — a date that has already passed by the time HMRC's auto-enrolment wave reached most of the 294,000 affected taxpayers this September. The second quarter, covering 6 July to 5 October, falls due on 7 November 2026, with the third (6 October to 5 January) due 7 February 2027 and the fourth (6 January to 5 April) due 7 May 2027. The old annual Self Assessment return and separate End of Period Statement have been replaced by a single Final Declaration, due by 31 January following the end of the tax year — 31 January 2028 for the 2026/27 tax year.

Anyone newly auto-enrolled should treat the first quarterly deadline as a check to make immediately, not a future date to plan around: if the 7 August update covering April to July hasn't been filed, it's already overdue, and the priority is closing that gap before the 7 November deadline for the second quarter adds a second missed submission on top of it. The practical sequence is to verify gross qualifying income against the 2024/25 Self Assessment return first, then choose MTD-compatible bookkeeping or bridging software — bridging software in particular lets someone keep an existing spreadsheet-based record while still submitting the digital updates HMRC requires — and finally confirm or formally re-establish agent authorisation through the HMRC digital services account rather than assuming an existing accountant relationship has already been carried across automatically.