Got an HMRC Letter About Making Tax Digital? Here’s What It Means
Last updated: February 2026
If a brown HMRC envelope has landed on your doormat recently, you are not alone. HMRC has begun writing to roughly 800,000 sole traders and landlords to notify them about Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). The letter is not a penalty notice and not a demand for payment. In this guide, I explain what the letter says, what you need to do, and what happens if you do nothing.
What is the HMRC MTD letter?
Since early 2026, HMRC has been sending letters to taxpayers whose qualifying income exceeds £50,000. The letter references Making Tax Digital for Income Tax and explains that from 6 April 2026, you will be legally required to keep digital records and submit quarterly updates to HMRC using compatible software.
This is a notification, not a penalty. The letter typically includes your Unique Taxpayer Reference (UTR), a summary of your new obligations, and a link to GOV.UK for further guidance.
If you are unsure whether the letter applies to your situation, you can check whether MTD applies to you using our free threshold checker.
Why did you receive this letter?
HMRC already holds your income figures from previous Self Assessment tax returns. If your qualifying income exceeds £50,000, you fall into Phase 1 of MTD for ITSA.
Qualifying income means your gross income from self-employment plus your gross UK property income. This is your turnover, not your profit. Expenses, capital allowances, and pension contributions do not reduce your qualifying income for this purpose.
Worked example
Tom is a self-employed plumber in Manchester. In the 2024/25 tax year, his business turnover was £62,000. After deducting £18,000 in allowable expenses (van costs, tools, insurance), his taxable profit was £44,000. Despite his profit being below £50,000, his gross income of £62,000 puts him firmly above the threshold. Tom will receive the HMRC letter and must comply with MTD from 6 April 2026.
If Tom also received £6,000 in rental income from a buy-to-let property, his qualifying income would be £68,000 — the two sources are added together.
What the letter is asking you to do
The letter does not expect you to act immediately, but you should not leave it until the last minute either. Here is what you need to do before 6 April 2026.
Step 1 — Check if you are actually affected
If your combined gross self-employment and UK property income exceeds £50,000, you are in scope for Phase 1. If it has dropped below that figure since the tax year HMRC used, you may not need to comply yet. Our threshold checker tool can help you work this out in under a minute.
Step 2 — Sign up for MTD with HMRC
You need to sign up through your Government Gateway account. If you do not already have one, you will need to create it first. Our step-by-step registration guide walks you through the entire process.
Step 3 — Choose MTD-compatible software
MTD requires you to submit updates using software recognised by HMRC. Spreadsheets alone will not suffice unless linked to compatible bridging software. You can compare compatible software on our comparison page to find the right fit for your business.
Step 4 — Start keeping digital records
From 6 April 2026, you must record your income and expenses digitally within your chosen software. Your first quarterly update covers the period 6 April to 5 July 2026 and must be submitted to HMRC by 7 August 2026. The full quarterly schedule is:
- Quarter 1 (6 Apr – 5 Jul) — submit by 7 August
- Quarter 2 (6 Jul – 5 Oct) — submit by 7 November
- Quarter 3 (6 Oct – 5 Jan) — submit by 7 February
- Quarter 4 (6 Jan – 5 Apr) — submit by 7 May
You will also need to submit a Final Declaration by 31 January following the end of the tax year, replacing the old Self Assessment return.
What if you think the letter is wrong?
There are legitimate reasons why the letter may not apply to you:
- Your income has dropped. HMRC bases its letters on previous tax returns. If your qualifying income has since fallen below £50,000, you may not be required to join Phase 1. You would instead fall into Phase 2 (from 6 April 2027 for income above £30,000) or Phase 3 (from 6 April 2028 for income of £20,000 or more).
- You qualify for an exemption. Certain groups are exempt from MTD, including foster carers, people without a National Insurance number, those who are digitally excluded, and individuals with a Power of Attorney or Court of Protection appointee managing their affairs. See our full list of exemptions to check whether you qualify.
- The income figure is incorrect. If HMRC has used an inaccurate income figure, you can contact them to dispute it.
To query the letter, call the HMRC Self Assessment helpline on 0300 200 3310 or write to them at the address printed on the letter. Have your UTR and National Insurance number ready.
Is this a scam?
HMRC scam letters and emails do circulate, so it is sensible to be cautious. Here is how to verify that your letter is genuine:
- A genuine HMRC letter will include your full name, UTR, and National Insurance number. It will not ask you to click a link or call a premium-rate number.
- HMRC will never ask for your bank account details, PIN, or passwords by letter.
- The letter should direct you to GOV.UK — not to any other website.
- If in doubt, do not use any contact details printed on the letter. Instead, go directly to GOV.UK’s HMRC contact page and call the official Self Assessment helpline.
You can also report suspected scam correspondence to HMRC at phishing@hmrc.gov.uk.
What happens if you ignore the letter?
Ignoring the letter does not remove the legal obligation. If your qualifying income exceeds £50,000, you are required to comply with MTD for Income Tax from 6 April 2026 regardless of whether you read the letter or not.
HMRC is introducing a points-based penalty system for late quarterly updates. Each late submission earns you one penalty point. Once you accumulate 4 points, you receive a £200 penalty — and the points do not reset easily. You can read more about how the penalty system works on our detailed guide.
However, there is some good news. HMRC has confirmed a soft-landing period for the 2026/27 tax year: you will not receive any penalty points for the first four quarterly updates. This gives you a full year to get your processes in order. But this does not mean you can ignore the requirement entirely — the soft landing only covers penalty points, not the underlying obligation to submit.
Frequently asked questions
I am a landlord, not a sole trader — does the letter apply to me?
Yes. Qualifying income includes gross UK property income. If your rental income alone or combined with self-employment income exceeds £50,000, you are in scope. Landlords are treated the same as sole traders under MTD.
My income is just over £50,000 — can I reduce it to avoid MTD?
Qualifying income is based on your gross income, not your profit. You cannot reduce it by claiming more expenses. The only way it falls is if your actual turnover drops. If your income genuinely falls below £50,000, you would not need to join until a later phase — but you must be honest about the figures. Artificially suppressing turnover to avoid MTD would be a serious matter.
I already use accounting software — do I still need to sign up?
Yes. Using accounting software is not the same as being signed up for MTD. You must register through your Government Gateway account, and your software must be MTD-compatible — meaning it can submit updates directly to HMRC via their API. Check with your provider whether your current package supports MTD for ITSA.
Will I get another letter for Phase 2 or Phase 3?
HMRC has indicated it will write to taxpayers ahead of each phase. Phase 2 begins on 6 April 2027 for those with qualifying income above £30,000, and Phase 3 begins on 6 April 2028 for qualifying income of £20,000 or more. If your income falls into one of these later brackets, you can expect a similar notification closer to the time.
What if I have both employment and self-employment income?
Employment income (PAYE salary) does not count towards your qualifying income for MTD purposes. Only gross self-employment income and gross UK property income are included. So if you earn £40,000 from employment and £15,000 from a side business, your qualifying income is £15,000 — well below the £50,000 threshold for Phase 1.
