If you’ve received a letter from HMRC about Making Tax Digital (MTD) for Income Tax, it usually means HMRC believes you will need to follow the new rules based on your most recent tax return.
Receiving this letter doesn’t mean you’ve done anything wrong. It simply means your income is expected to fall within the MTD thresholds, and HMRC is asking you to start preparing.
At this stage, it’s common to have questions. You may be unsure what you need to do next, whether you need software, or how the rules apply if you are planning to retire or reduce your workload.
This guide explains what the letter means and the steps you should take now.
Learn more about Making Tax Digital in our MTD: Essential Guide.
Quick Summary (TL;DR)
If you’ve received a Making Tax Digital (MTD) letter from HMRC:
- It means your income is above the MTD threshold based on your latest tax return
- You have not done anything wrong. HMRC is asking you to prepare
- You will need to sign up for MTD before your first quarterly submission deadline
- You will need to use HMRC-recognised software and keep digital records
- Setting up a separate bank account can make record-keeping much easier
- If you are retiring or your circumstances are changing, your position may differ
If you are unsure or need help understanding MTD, Cutter & Co Chartered Accountants can help.
Why Have I Received This Letter?
HMRC is writing to individuals who are expected to fall within Making Tax Digital for Income Tax based on their most recent Self Assessment tax return.
You are likely to receive a letter if your total income from self-employment and property is above the MTD thresholds:
- From April 2026 – Income over £50,000
- From April 2027 – Income over £30,000
- From April 2028 – Income over £20,000
HMRC uses the information from your submitted tax returns to assess whether you need to join Making Tax Digital.
If your income was above the relevant threshold, HMRC will contact you to let you know that you are expected to prepare for MTD and register in advance of your first quarterly submission.
Keep an eye on the HMRC MTD website for the latest information on submission dates and deadlines: https://makingtaxdigital.campaign.gov.uk/mtd-for-income-tax-dates/
What Do I Need to Do Now?
If you’ve received a Making Tax Digital letter from HMRC, there are a few straightforward steps you should take to get prepared.
- Confirm whether MTD applies to you.
Start by checking your total income from self-employment and property. If it exceeds the relevant threshold, you will need to follow MTD rules. If you’re unsure, your accountant can confirm your position. - Register for Making Tax Digital
You will need to sign up for MTD before your first quarterly submission is due. This can be done by you or by your accountant acting as your agent. - Start keeping digital records
You will need to keep your income and expenses in a digital format. This is a key part of MTD and will make your quarterly submissions much easier. - Use HMRC-recognised software
Your records must be kept using software that can submit updates directly to HMRC. There is a range of options available, depending on your needs and how you currently manage your finances. Read our MTD Software Guide for more information. - Open a separate bank account
If you don’t already have one, a dedicated account for your self-employed or rental income can make record-keeping much simpler and reduce the risk of errors.
What If I’m Retiring Soon?
Some people who receive a Making Tax Digital letter may be planning to retire or stop their self-employment or rental activity in the near future.
In some cases, if you expect to cease self-employment or rental activity before or shortly after the start of Making Tax Digital, you may not need to fully join the system. However, this depends on your individual circumstances and timing.
It is important not to assume you are exempt. You should speak to your accountant, who can review your situation and advise whether you still need to register, or whether an exemption or alternative arrangement may apply.
We have already helped several clients in this position and can guide you through the process.
If you would like support managing your retirement in line with MTD requirements, please get in touch.
Can I Get an Exemption from MTD?
In some cases, you may be able to apply for an exemption from Making Tax Digital for Income Tax if it is not practical for you to keep digital records or submit updates online.
There are a range of reasons why an exemption may apply, and each case is considered individually by HMRC. It’s important not to assume you will qualify without checking your specific circumstances.
You can review the latest guidance and eligibility criteria on the GOV.UK website: https://www.gov.uk/guidance/find-out-if-you-can-get-an-exemption-from-making-tax-digital-for-income-tax
If you are unsure, it’s worth seeking advice. We can help you understand your position and guide you through the process to determine whether an exemption may be appropriate. Please get in touch.
What Happens If I Ignore the Letter?
Ignoring a Making Tax Digital letter from HMRC is not recommended.
While there may be a transition period as MTD is introduced, the requirement to comply still applies. This means you are expected to register, keep digital records, and submit updates in line with the rules.
If no action is taken, you may:
- Miss important deadlines
- Fall behind on submissions
- Receive further communication from HMRC
- Risk penalties once the system is fully enforced
The earlier you take action, the easier it is to get set up properly and avoid complications later on.
If you are unsure what the letter means or what you need to do next, it’s worth addressing it early rather than leaving it until deadlines are closer.
Read our What If I Miss the Making Tax Digital Deadline? article to find out more.
How Cutter & Co Can Help
We understand the additional administrative burden MTD places on self-employed individuals and landlords, especially when you’re focused on doing the work and keeping things moving day-to-day.
If you’re unsure what the letter means, whether MTD applies to you, or what steps to take next, we can help you get clear, practical answers.
We can help you:
- Confirm whether MTD applies to you
- Check your registration status
- Review any missed submissions
- Communicate with HMRC if necessary
- Bring your records up to date
- Put systems in place so future deadlines are handled smoothly
If you would like some support or simply want reassurance that you are on the right track, please get in touch.
