Making Tax Digital for Income Tax became compulsory for the first group of sole traders and landlords from 6 April 2026.

HMRC is now taking the next step.

From September 2026, HMRC is starting to sign up people who it believes should already be using Making Tax Digital, but who have not registered themselves.

If you receive a notification from HMRC telling you that you have been signed up, it is important not to ignore it.

Who is affected?

For 2026/27, Making Tax Digital for Income Tax generally applies to sole traders and landlords whose qualifying income was more than £50,000 in 2024/25.

Qualifying income broadly means gross income from self-employment and property before deducting expenses. Other income, such as employment income, pensions and dividends, is not included when deciding whether the £50,000 threshold has been exceeded.

HMRC is using information it already holds to identify people who should be within the system.

That creates an important point. HMRC’s information may not reflect changes that have occurred since the relevant tax return was submitted.

If HMRC signs you up and you believe you should not be within Making Tax Digital, the position should therefore be checked rather than simply assuming HMRC must be correct.

Being signed up is only the beginning

Automatic registration does not remove the practical work involved in Making Tax Digital.

Those within the system need compatible software and must create and maintain digital records of their self-employment or property income and expenses.

They must also use compatible software to send quarterly updates to HMRC.

More than 436,000 sole traders and landlords had successfully submitted their first quarterly update by 12 August 2026, according to HMRC.

If you should have submitted an update but have not yet done so, action should be taken. HMRC has confirmed that late quarterly updates will not attract late-submission penalties during 2026/27, although the outstanding updates still need to be submitted.

More people join next April

Even if Making Tax Digital does not apply to you this year, it may do so shortly.

From 6 April 2027, the qualifying income threshold falls to £30,000. Whether you need to join will therefore depend on your qualifying self-employment and property income for 2025/26.

This means some sole traders and landlords who are outside MTD at present have only a few months to prepare.

Waiting until next April before thinking about accounting software, digital record keeping and quarterly reporting could make the transition unnecessarily difficult.

If you have received an MTD communication from HMRC, or think you could be brought within the rules from April 2027, speak to us. We can check when the rules apply to you and help you prepare for the change.

When a sole trader or the partners in a partnership transfer a business to a limited company, Capital Gains Tax (CGT) may arise. This is because business assets are normally treated as being transferred at their market value, which may be considerably more than their original cost.

However, Incorporation Relief can allow some or all of the resulting gain to be deferred.

Broadly, the relief may be available where a business is transferred to a company as a going concern, together with all its assets, other than cash if desired, and the consideration received is wholly or partly in shares in the company.

Where the conditions are met, the gain eligible for relief is deducted from the CGT base cost of the shares received. This means that CGT is generally postponed until the shares are eventually sold or otherwise disposed of. If cash or other consideration is received alongside shares, the relief is normally restricted to the proportion of the transfer represented by shares. Part of the gain may therefore become immediately chargeable to CGT.

Incorporation Relief must now be claimed

An important change applies to businesses transferred to companies on or after 6 April 2026. Previously, Incorporation Relief applied automatically where the necessary conditions were satisfied. For transfers from 6 April 2026, the relief must instead be claimed. The claim will normally be made through the Self-Assessment tax return for the tax year in which the transfer takes place.

The claim must be made on or before the first anniversary of 31 January following the tax year in which the business transfer took place. For example, for a transfer during the 2026/27 tax year, the claim deadline will normally be 31 January 2029.

Failing to make a valid claim could therefore result in CGT becoming payable on gains arising when the business is transferred to the company.

Incorporation Relief is not necessarily the best option in every case. Before incorporating a business, it is worth considering the immediate CGT consequences, whether other reliefs may be available and the potential tax position when the company shares are eventually sold.

Professional advice should therefore be obtained before completing a business incorporation, particularly where the business has significant goodwill, property or other assets that have increased substantially in value.

Businesses that register for VAT may be able to reclaim VAT paid on certain goods and services purchased before VAT registration. 

There are specific time limits for claiming pre-registration VAT. VAT on goods can generally be reclaimed where the goods are still held by the business or have been used to produce other goods that are still held by the business. The claim must relate to goods purchased within 4 years before the date of registration.

VAT on services can usually be reclaimed where the services were purchased within 6 months before registration. In both cases, the costs must relate to the business that is now registered for VAT and be attributable to its taxable activities.

Pre-registration VAT should be included on the business’s first VAT return. Businesses should ensure they hold valid VAT invoices and records to support the claim, including details of how any business and private use has been calculated.

There are special rules for certain situations, including partially exempt businesses, businesses with non-business income and significant capital assets covered by the Capital Goods Scheme. These rules can affect the amount of VAT that can be recovered.

It is therefore important for businesses to check the pre-registration rules carefully to ensure that all eligible VAT is identified and claimed correctly. 

1 September 2026 – Due date for corporation tax due for the year ended 30 November 2025.

19 September 2026 – PAYE and NIC deductions due for month ended 5 September 2026. (If you pay your tax electronically the due date is 22 September 2026)

19 September 2026 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2026. 

19 September 2026 – CIS tax deducted for the month ended 5 September 2026 is payable by today.

1 October 2026 – Due date for Corporation Tax due for the year ended 31 December 2025.

19 October 2026 – PAYE and NIC deductions due for month ended 5 October 2026. (If you pay your tax electronically the due date is 22 October 2026)

19 October 2026 – Filing deadline for the CIS monthly return for the month ended 5 October 2026. 

19 October 2026 – CIS tax deducted for the month ended 5 October 2026 is payable by today.

31 October 2026 – Latest date you can file a paper version of your 2025-26 self-assessment tax return.

The new Chancellor of the Exchequer, John Healey has confirmed, in a video message, that the next UK Budget will take place on Wednesday, 28 October 2026. Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s first Budget speech in October.

HM Treasury is inviting written representations for the Autumn Budget 2025 from individuals, interest groups, MPs and organisations. Submissions should propose evidence-based policy ideas or comment on existing policies, with clear rationale, costs, benefits and deliverability. The deadline for submissions is 23:59 on Wednesday, 9 September 2026.

The Budget will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR). This forecast will be in addition to that published for the Spring Statement and fulfil the obligation for the OBR to produce at least two forecasts in a financial year, as is required by legislation.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.