HMRC's Auto Sign-Up for MTD Has Started: What It Means for Your Practice

General information for practice owners, current to September 2026. Figures and dates are HMRC's own, published in its guidance and reporting since August 2026; the rollout is staged and details can change — take your own advice before relying on any of this for a specific client.

For most of 2026, getting a client into Making Tax Digital for Income Tax has been something your practice controlled: you checked the threshold, chose the moment, and signed them up through your agent services account. From September 2026, HMRC has started doing that job itself for anyone it thinks should already be in and isn't. The mechanics matter less than one specific design choice inside the change — the confirmation letter goes to the client, not to you — and that is the part worth getting ahead of this month.

What's changing from September 2026

Making Tax Digital for Income Tax has been mandatory since 6 April 2026 for anyone registered for Self Assessment whose combined self-employment and property income, before expenses, came to more than £50,000 on their 2024-25 tax return. Bringing someone into MTD has, until now, meant the client or their agent actively signing up through HMRC's online service, choosing compatible software, and starting quarterly updates. From September 2026, HMRC is running a parallel process: using the income data it already holds from the 2024-25 return, it is identifying everyone who appears to meet the £50,000 threshold for 2026-27 but hasn't signed up voluntarily, and registering them without being asked. The taxpayer then gets a letter or a digital message, depending on their stated preference, telling them they've been enrolled and what to do next — get compatible software, keep digital records, and start filing quarterly updates.

The numbers behind the rollout

The scale explains why HMRC has moved to this second track. More than 570,000 sole traders and landlords had already signed up for MTD for Income Tax for 2026-27 by the time the auto-enrolment run began, and over 436,000 of those had successfully filed their first quarterly update. Against that voluntary base, HMRC has said roughly 294,000 people who should be in the scheme have not yet joined it — and that is the population the auto sign-up is working through, in stages, over the following months, pausing around the Self Assessment filing peak in January so it doesn't collide with HMRC's own busiest period. (HMRC even took its own MTD sign-up service offline for scheduled maintenance from 11 to 15 September 2026, in the same window the programme got under way.)

The threshold is also only the first of three. It steps down twice more over the following two years, pulling a progressively larger slice of any general practice's client bank into scope — and, on current form, into the same auto-enrolment mechanism if they don't act first.

The blind spot: the letter doesn't reach you

This is the detail that should change how your practice behaves this month. HMRC has been explicit that when it auto-enrols a taxpayer, it writes to that individual and asks them to share the communication with their agent — it does not send a separate copy to the accountant. For a client who reads their post and picks up the phone, that's a minor inconvenience. For the much larger number who don't recognise the term or simply put it in a drawer, it means your firm can have a client sitting inside MTD, with quarterly obligations already running, and no idea it has happened.

There's a second problem layered on top: HMRC's auto sign-up works from the income figure on the 2024-25 return, with no visibility of what's happened since. A landlord who has sold a property, or a sole trader who has scaled back or incorporated, can still be enrolled on a threshold they no longer meet. That combination — a letter the client doesn't forward, based on data that may already be out of date — is exactly how a firm ends up finding out about a client's MTD status from a missed-deadline notice rather than from the client.

When HMRC gets it wrong, fixing it is slower than doing it right the first time

HMRC's own guidance is candid about the asymmetry here: correcting an incorrect or premature auto sign-up is described as less flexible, and can take longer, than checking the position and signing a client up proactively. In practice that means a phone call to HMRC's agent line, evidence of the change in circumstances, and a wait for the record to be updated — time your firm spends unwinding a decision HMRC made from stale data. Proactive sign-up avoids that: the agent services account lets you review a client's position against current information before committing them, rather than after the letter has already gone out.

The penalty easement — and where it doesn't reach

HMRC has confirmed that for a taxpayer's first year in MTD for Income Tax, 2026-27, it will not apply penalty points for late quarterly updates — the reason Grace's missed updates above don't cost her anything directly. But the easement is narrow: it covers the quarterly update obligation only, and does nothing to the penalty regime for a late Self Assessment return or for tax paid late, both of which continue exactly as before. Use it to reassure a worried client, not as a reason to treat the letters as low priority.

What to do this week

1. Pull a list of every client — not just current MTD clients — whose 2024-25 self-employment and property income, before expenses, exceeded £50,000, and check who still isn't signed up.
2. Sign eligible clients up yourself through your agent services account rather than waiting for HMRC's letter. You choose the timing and can verify the numbers first.
3. Flag the letter specifically to anyone near the threshold, including clients who have sold property or scaled back trading since 2024-25, so they send it to you rather than filing it.
4. Where a client is already auto-enrolled, check the income data HMRC used is still accurate and get any change corrected promptly — this gets harder the longer it's left.
5. Build a standing instruction into onboarding and review calls: "if HMRC writes to you about tax, send it to us the same day."
6. Start planning capacity for 2027/28. The £30,000 threshold pulls a much larger group into scope, and the same blind spot applies to all of them.

None of this is complicated, but it's easy to leave until a client calls confused about a penalty notice. Firms already stretched by MTD's rollout — see our take on the 2026 capacity crunch — are the ones most likely to let the auto sign-up run land on them. If you haven't revisited your MTD onboarding plan since the April launch, our earlier piece on what MTD for Income Tax means for your practice is the fuller starting point.

Frequently asked questions

What is HMRC's automatic sign-up for Making Tax Digital for Income Tax?

From September 2026, HMRC is signing up taxpayers itself if its records show they should already be in Making Tax Digital for Income Tax for 2026-27 but have not registered. It is working from each person's 2024-25 Self Assessment return, and treats anyone whose self-employment and property income together came to more than £50,000, before expenses, as in scope. HMRC has said around 294,000 sole traders and landlords fall into this group, and the process is running in stages over several months, pausing around the Self Assessment peak in January. Registration is not optional once HMRC identifies someone this way — it happens automatically unless HMRC agrees the taxpayer does not actually qualify.

Will HMRC tell me if one of my clients has been auto-enrolled?

Not directly. HMRC has confirmed it will write to the taxpayer, either by letter or through their digital preferences, and will ask them to share that communication with their agent — it will not send a separate copy to you. If a client doesn't recognise what the letter means, files it away, or simply forgets to mention it, your practice can be unaware that quarterly obligations have already started. The only reliable way to close this gap is to ask every client under review, or being onboarded now, to forward anything from HMRC about tax immediately, and to run your own check of who is near the threshold rather than waiting to be told.

What happens if HMRC auto-enrols a client who shouldn't be in MTD?

It can happen, because HMRC's system works only from the income declared on the 2024-25 return — it has no way of knowing a client has since sold a rental property, closed a self-employment, or otherwise dropped below £50,000. If that happens, the client or their agent needs to contact HMRC to explain the change and have the sign-up corrected or removed. HMRC's own guidance is candid that this route is less flexible and can take longer than getting the sign-up right in the first place, which is the practical argument for reviewing your client list and pre-empting incorrect enrolments before HMRC's letters go out.

Are there penalties for missing a client's first quarterly update after auto sign-up?

Not for the update itself, in year one. HMRC has said it will not apply penalty points for late quarterly updates during a client's first year in Making Tax Digital for Income Tax, 2026-27, recognising that adjustment takes time. That easement is narrow, though — it covers quarterly updates only. The penalties for a late Self Assessment return or a late payment of tax owed are unaffected and continue to apply in the normal way. A client who ignores an auto sign-up letter entirely, rather than just missing a quarterly deadline, is still exposed on those two fronts, so the easement is not a reason to treat the letter as low priority.