HMRC has started sending out mandation letters to sole traders, landlords, and self-employed individuals whose income exceeded the relevant thresholds in their recent Self Assessment returns. If you've received one of these letters, don't panic — but don't ignore it either.
The letter is simply informing you that you'll need to start using MTD-compatible software to report your income and expenses digitally from April 2026. This is part of HMRC's effort to modernise the tax system and reduce errors that cost billions in lost tax revenue each year.
What Does the Letter Actually Say?
The mandation letters being sent in February and March 2026 contain some important information. Here's what HMRC is telling you:
MTD Customer Awareness Letters: February and March 2026
You will need to change the way you report your income and expenses to HMRC.
We're introducing Making Tax Digital for Income Tax for some sole traders and landlords. You'll need to use Making Tax Digital for Income Tax from 6 April 2026 as your total income was over £50,000 from self-employment and property in your 2024 to 2025 tax return. This is your qualifying income which is worked out before expenses or taxes are deducted.
What is Making Tax Digital for Income Tax
Making Tax Digital for Income Tax is a new way for sole traders and landlords to report income and expenses to HMRC. You, or your agent if you have one, will need to use software that works with Making Tax Digital for Income Tax to:
- create, store and correct digital records of your self-employment and property income and expenses
- send your quarterly updates to HMRC
- submit your tax return by 31 January the following year
The letter goes on to explain what you need to do to get ready, including getting compatible software and signing up for Making Tax Digital for Income Tax.
Who's Receiving These Letters?
HMRC is sending mandation letters in waves, depending on when you filed your 2024/25 Self Assessment return:
November 2025
Letters sent to taxpayers who filed their 2024/25 return by 31 August 2025. Around 200,000 people received these initial letters.
February–March 2026
Letters being sent to those who filed their returns between September 2025 and January 2026. These are the current mandation letters going out now.
Late November 2025
Separate "prompt letters" sent to unrepresented taxpayers who hadn't filed their 2024/25 return by 31 August, reminding them about the April 2026 start date.
Important Note
Tax agents, accountants and bookkeepers are not being sent copies of these letters. HMRC is relying on taxpayers to share the letter with their agent if they have one.
What Should You Do If You Receive a Letter?
The letter outlines what HMRC expects you to do to prepare for 6 April 2026:
Act now to get ready for 6 April 2026
You will need to:
- get commercial software that works with Making Tax Digital for Income Tax to keep digital records, submit quarterly updates and file your tax return. From the 2026 to 2027 tax year, you'll no longer be able to file using the current HMRC Online Tax Return system or by paper
- sign up for Making Tax Digital for Income Tax, so you're ready to use the service from 6 April 2026
Don't ignore the letter — HMRC won't automatically register you for MTD. You need to take action yourself.
Check your qualifying income to confirm you're actually in scope (the letter should be accurate, but it's worth double-checking).
Start researching MTD-compatible software options like Otis — don't wait until the last minute.
Consider signing up early to avoid the rush and give yourself time to get comfortable with the new system.
Share the letter with your accountant or bookkeeper if you have one, since they won't receive a copy directly from HMRC.
What If You Didn't Receive a Letter?
This is crucial: not receiving a letter doesn't mean you're exempt from Making Tax Digital. HMRC has been very clear that it's ultimately your responsibility to check if and when you need to use MTD for Income Tax, and to make sure you're signed up and prepared to use it when required.
There are several reasons why you might not have received a letter:
- Your qualifying income was just below the £50,000 threshold in 2024/25 (but you might still exceed it in future years)
- You haven't filed your 2024/25 Self Assessment return yet (but you still might be in scope)
- Your letter is still in the post (some people may not receive theirs until late March or early April)
- HMRC's records are incorrect or out of date (rare, but possible)
If you think you should be using MTD for Income Tax but haven't received a letter, you should still sign up. You can check your eligibility and register through HMRC's website.
Understanding the New Penalties
The mandation letter also explains the new penalty system that will apply under Making Tax Digital:
New penalties
Under the new late submission penalties, a penalty point is awarded where a quarterly update or tax return deadline is missed. Once a four-point threshold is reached, a financial penalty will be issued.
For the 2026 to 2027 tax year only, you will not receive a penalty point if your quarterly update is submitted late. Whilst there is no penalty, you must submit the quarterly updates before a tax return can be submitted. A penalty point will still be awarded where tax returns are not submitted by the 31 January 2028 deadline.
From the 2027 to 2028 tax year, penalty points will be applied if you submit any quarterly update or tax return late.
What this means in practice: you've got some breathing room in the first year (2026/27), but from 2027/28 onwards, missing quarterly deadlines will start to count against you. It's worth getting into good habits from the start.
Don't Forget Your 2025/26 Tax Return
Your 2025 to 2026 Self Assessment tax return
You should still submit your tax return for the 2025 to 2026 tax year as normal. Financial penalties will be applied where a tax return or payment is made after the due date.
This is really important: even though you'll be starting to use MTD from 6 April 2026, you'll still need to file a traditional Self Assessment return for the 2025/26 tax year by 31 January 2027.
This means there will be a brief overlap period where you'll be submitting quarterly updates for 2026/27 while also filing your final "old-style" Self Assessment return for 2025/26. After that, everything moves to the new MTD system.
How Otis Can Help
If you've received one of these mandation letters, the good news is that getting MTD-ready doesn't have to be complicated or expensive. Otis is designed specifically for people like you — sole traders, landlords, and self-employed professionals who want simple MTD compliance without the complexity of traditional accounting software.
Works alongside your existing records — keep using your spreadsheet or whatever method works for you
Handles quarterly updates automatically — no need to remember deadlines or worry about formatting
Simple sign-up process — we'll guide you through registering with HMRC
Designed for self-employed professionals — not bloated with features you don't need
You can learn more about how Otis works in our software guide, or explore our complete MTD guide for sole traders.
Key Takeaways
Receiving a letter means you need to act — HMRC won't register you automatically
Not receiving a letter doesn't mean you're exempt — check your qualifying income and sign up if needed
You need to get compatible software before 6 April 2026
You'll still need to file a traditional Self Assessment return for 2025/26
The new penalty system is lenient in the first year, but tightens up from 2027/28
Share the letter with your accountant if you have one — they won't get a copy from HMRC
Ready to Get MTD-Ready?
Don't wait until the last minute to sort out your MTD compliance. Get early access to Otis and make the transition as smooth as possible.
Disclaimer
The content included in this guide is based on our understanding of making tax digital legislation at the time of publication. It may be subject to change and may not apply to your individual circumstances. This guide should not be relied upon as tax advice — you are responsible for complying with tax rules and regulations and should seek independent advice if you require further information.