MTD for ITSA: Who Needs to Register in 2026

MTD for ITSA: Who Needs to Register in 2026 and What to Do if HMRC Sends You a Letter

Throughout the 2025–2026 tax year, a lot of self-employed individuals have been receiving letters from HM Revenue & Customs regarding the upcoming switch to Making Tax Digital (MTD) for Income Tax.

Naturally, this sparks quite a few questions: do you really have to rush to register? What if your earnings are under the £50,000 mark? And is there any legal way to opt out?

Let’s break down the answers to your most common questions, based entirely on official HMRC guidance.

Do I have to register for MTD just because I got a letter?

No. Don’t panic just yet. That letter is simply a notification, not a legally binding demand to sign up immediately. You only have to register if you actually meet the set criteria. According to HMRC, using MTD is only mandatory if your gross income goes over the specific threshold.

How do I know if I actually fall under MTD rules?

You need to look at your total income (before deducting expenses) for the 2025–2026 tax year, which runs from April 6, 2025, to April 5, 2026. If that figure is over £50,000, you are legally required to use MTD starting April 6, 2026.Source: HMRC

My income is £49,800. Do I need to do anything?

No. If your income is below £50,000, you don’t need to register, and you don’t even need to contact HMRC to tell them. You simply continue filing your taxes using the standard Self Assessment system you’re used to.

When exactly does the obligation to switch to MTD start?

The requirement kicks in after the end of the tax year in which your income broke the threshold. So, if your total income at the end of the 2025–2026 tax year sits above £50,000, your mandatory switch to MTD starts in April 2026.Source: HMRC

Should I register early if I expect my income to grow soon?

No. HMRC doesn’t require you to register based on projections or business plans. Your obligation to join MTD is determined strictly by your actual income for a completed tax year.

I made over £50,000 this year, but I know my income will drop next year. What now?

If your income for 2025–2026 goes over £50,000, you are still obligated to use MTD from April 2026—even if you are certain you will earn less the following year. The system looks strictly at the qualifying previous tax year.

Is it possible to opt out of MTD entirely?

Yes, but only if applying MTD is considered “not reasonably practicable” for you. This exemption is usually granted for objective reasons, such as a severe health condition, disability, age, religious beliefs, or a complete lack of digital access (like living in a remote area without broadband). Source: HMRC

How do I apply for an exemption?

You’ll need to contact HMRC, either through your online Personal Tax Account or by writing them a letter. In your application, confirm that your income level meets the MTD threshold, but clearly explain your circumstances and detail exactly why keeping digital records isn’t reasonably practicable for you.

When should I apply for this exemption?

If you already know you have grounds for an exemption, it’s best to submit your application before April 2026. If your circumstances change later on, you can apply as soon as those new issues arise.

I already registered for MTD, but my income has dropped. Can I leave?

A drop in income doesn’t trigger an automatic exit from MTD, unfortunately.

• If you’ve closed your business entirely, you must notify HMRC that you have ceased self-employment.

• If you’re still trading but now have valid grounds for an exemption (as mentioned above), you need to apply for it directly.

Will I be fined if I don’t register in advance?

No. There are no penalties for not registering “early.” You can only be fined if you are legally required to use MTD and you fail to comply with the rules after your mandatory start date.

The Bottom Line

• Your MTD status depends entirely on your income during the 2025–2026 tax year.

• Income under £50,000 = no changes required. Keep doing what you’re doing.

• Income over £50,000 = you must switch to MTD by April 2026.

• Exemptions are available, but only for valid, objective reasons, and you have to apply for them directly through HMRC.

Author: Jelena Vitkovskaja

When Ignorance of the Law Actually Works: What the Julian (2026) Case Revealed

What to do if HMRC issues a penalty

When HMRC hits you with a penalty for a tax breach—whether it’s a late filing, an error, or a delayed registration—taxpayers have one primary line of defense: proving they had a “reasonable excuse.” In practice, this is the most common argument used when appealing HMRC fines. First, HMRC evaluates the situation and makes a decision. If they reject your explanation, you can take the dispute to a Tribunal. Therefore, the question of a reasonable excuse is tackled in two stages: first by the tax authority, and then by the court.

What is a reasonable excuse?

The law doesn’t actually provide a strict definition for this term. However, based on case law (such as The Clean Car Company Ltd [1991]), an objective test applies: the taxpayer must have acted as a reasonable person would have, exercising due diligence.

This means it’s not about what you thought, but rather how objectively reasonable your actions were. The court will take your circumstances into account, including your experience, knowledge, and the scale of your business.

The Julian (2026) Case: When ignorance actually worked

According to an analysis by Croner Tax Weekly based on the First-tier Tribunal’s decision in Julian (2026), the court examined the situation of farmers using the Agricultural Flat Rate Scheme.

Following a legislative change in 2021, they were required to register for VAT. However, neither the farmers nor their accountant noticed the rule change, resulting in a penalty for failure to notify.

Normally, ignorance of the law isn’t a valid excuse. Yet, the Tribunal took into account that the change was highly technical, poorly publicized, and definitely not obvious to a layperson. Furthermore, the accountant did not specialize in VAT. The court concluded that, under these specific conditions, the taxpayers could not have reasonably discovered the change. As a result, their ignorance was accepted as a reasonable excuse.

When ignorance of the law can be a reasonable excuse

Case law shows that this argument rarely succeeds, but it is possible if:

• The legislation is complex or was recently changed.

• The changes weren’t clearly communicated to taxpayers.

• Reasonable attempts were made to comply with the rules.

Conversely, ignorance will be rejected if the obligation is common knowledge, the information is easily accessible, or the taxpayer simply made no effort at all.

The Accountant’s Responsibility: Where to draw the line

An accountant’s mistake can be considered a reasonable excuse provided you hired a qualified specialist, gave them complete information, and the error wasn’t glaringly obvious.

However, this defense falls apart if the accountant is clearly incompetent, the taxpayer exercised zero oversight, or the mistake could have been caught with a basic check. The courts evaluate the behavior of the taxpayer, not just the actions of the accountant.

Excuses HMRC usually accepts

Circumstances that may qualify as a reasonable excuse include:

• Serious illness.

• Technical failures beyond your control.

• Mistakes made by a qualified advisor.

• Highly complex legislative changes.

Excuses HMRC usually rejects

As a general rule, HMRC will not accept:

• Forgetfulness or being “too busy.”

• Poor record-keeping.

• Ignoring official notices.

The Crucial Condition: No Unreasonable Delay

Even if you have a rock-solid reasonable excuse, you are legally required to fix the breach immediately. For example, once you recover from an illness, you must file your return; once you spot an error, you must correct it right away. Dragging your feet can completely invalidate your defense.

Conclusion

The Julian (2026) case doesn’t rewrite the general rule, but it does clarify how it’s applied. Ignorance of the law still rarely saves the day. However, in situations where an obligation couldn’t reasonably be discovered even with due diligence, this defense remains a viable option.

Sources:

• Croner Tax Weekly — Analysis of the First-tier Tribunal decision in Julian (2026)

• HMRC Guidance — Reasonable excuse and penalties

• The Clean Car Company Ltd [1991] BVC 568

• Perrin v HMRC [2018] UKUT