From September 2026, HMRC is progressively auto-enrolling around 300,000 eligible taxpayers into Making Tax Digital for Income Tax (MTD-IT) — those who have not yet joined voluntarily (PublicTechnology, 28 August 2026). For SME finance teams affected by this rollout, the question is no longer whether they will be enrolled, but under what conditions — and with what data.
Background: 570,000 signed up, 300,000 still to go
The MTD-IT programme came into force on 6 April 2026 for self-employed individuals and landlords with qualifying income above £50,000 for the 2024–25 tax year. By August 2026, more than 570,000 taxpayers had voluntarily signed up and over 436,000 had submitted their first quarterly update (ICAS, 25 August 2026). Encouraging — but not enough to cover the full first-wave population.
HMRC therefore triggered automatic enrolment: anyone eligible who has not yet joined MTD-IT receives a letter or digital notification informing them of their inclusion in the scheme.
The real risk: MTD obligations generated from incorrect data
The point most commonly overlooked by finance teams is this: HMRC draws on the information from the most recent tax return filed to generate the MTD obligations for an auto-enrolled taxpayer (Newby Castleman, 8 September 2026). That data may be out of date if, since the last return:
- an income source has been sold or abandoned (rental property disposed of, self-employment ceased)
- a new activity has started with a different income level
- the address or contact details have changed
The consequence: quarterly obligations could be generated for income that no longer exists, or with incorrect enrolment parameters that are difficult to correct after the fact. HMRC does plan a verification step for auto-enrolled individuals, but it happens after enrolment — not before. Signing up proactively and voluntarily remains the only way to control data quality from the outset (ICAS, ibid.).
MTD-IT certified software: what finance teams need to know
Joining MTD-IT requires HMRC-recognised software for keeping digital records and submitting quarterly updates. A well-structured Excel spreadsheet does not meet the programme’s requirements.
Currently recognised solutions fall into two categories:
Integrated accounting software (record-keeping and quarterly submission in a single tool):
- Sage Accounting — Sole Trader & Landlord plan available free, paid plans from £18/month (Sage UK, MTD Software)
- Xero — from £7/month, widely used across UK accountancy practices
- QuickBooks Sole Trader — from £10/month (Intuit)
- FreeAgent — from £10/month for landlords, £19/month for the self-employed
Bridging software for businesses that already maintain their accounts in another tool:
- 123 Sheets, BTCSoftware, VitalTax — allow MTD data submission without changing your primary accounting system
For businesses running a mid-market ERP (Sage X3, SAP Business One, Microsoft Dynamics 365, Oracle NetSuite), MTD-IT compatibility typically requires a third-party connector or a dedicated integration module. SAP Business One has a documented HMRC integration delivered by NTT DATA (NTT DATA, MTD with SAP Business One). NetSuite includes an International Tax Reports module compatible with MTD at no extra charge (Oracle NetSuite, MTD Support). For any other ERP, checking the official HMRC list before committing remains mandatory.
HMRC is clear that “recognised” means the software has been tested with its MTD systems — it is not an editorial endorsement of the product itself.
What to watch next
The next wave arrives in April 2027. The threshold drops from £50,000 to £30,000, bringing roughly 970,000 additional taxpayers into MTD-IT scope. Then in April 2028, the threshold falls to £20,000, taking the total affected population to nearly 2.7 million people across the UK (Moore UK, MTD for Income Tax Timeline). For ERP vendors and UK accountancy firms, each wave represents a new cycle of software upgrades and data migration.
To understand the auto-enrolment mechanics and what they mean specifically for sole traders, read our article HMRC Auto-Enrolls UK Self-Employed Not Yet in MTD. For the UK ERP market landscape and the vendors historically positioned for MTD compliance, see our UK ERP Market 2026: Sage UK, Access Group, Making Tax Digital and Post-Brexit Dynamics. And for the full regulatory framework since the April 2026 launch, our article Making Tax Digital UK: Income Tax Obligation for Income >£50,000 Takes Effect covers the complete picture.
