Making Tax Digital (MTD) for Income Tax is now underway, with the first quarterly reporting deadline having passed for sole traders and landlords within the initial phase of the new system.
Since 6 April 2026, sole traders and landlords with qualifying income of more than £50,000 have been required to keep digital records and submit quarterly updates to HMRC using compatible software.
First quarterly deadline has passed
The first quarterly update covered the first three months of the 2026–27 tax year and was due by 7 August 2026.
HMRC has confirmed that 436,000 taxpayers submitted their first quarterly update by the deadline. Those who have not yet submitted their update are being reminded to do so using HMRC-recognised software.
However, the figures also suggest that a significant number of taxpayers who should be complying with MTD for Income Tax have yet to register.
MTD registration remains behind expectations
As of 12 August 2026, more than 570,000 taxpayers had signed up for MTD for Income Tax.
This compares with HMRC’s previous estimate of around 864,000 taxpayers who would need to join the scheme from April 2026, based on 2023–24 figures.
This means that many taxpayers who appear to fall within the first phase of MTD for Income Tax had still not registered.
HMRC to begin signing taxpayers up
HMRC has confirmed that, from September, it will begin signing up taxpayers who are required to use MTD for Income Tax for 2026–27 but have not registered themselves.
Taxpayers who are within the scope of MTD can avoid being automatically signed up by registering themselves now. This also provides an opportunity to check that their details are correct before they begin using the service.
If you receive a letter from HMRC about being signed up, you should make sure you understand what action is required and when.
Who will need to comply?
MTD for Income Tax is a legal requirement for sole traders and landlords with qualifying income above the relevant threshold, unless an exemption applies.
The income threshold will also reduce in future. From April 2027, sole traders and landlords with qualifying income of more than £30,000 will be required to comply.
This means that businesses and landlords who are not currently affected may still need to prepare for MTD in the near future.
What about penalties?
HMRC has confirmed that penalty points will not be issued for late quarterly updates during 2026–27.
However, this does not mean that there are no potential penalties. The normal penalties for late tax returns and late tax payments will continue to apply.
It’s also important to remember that quarterly updates do not replace the Self Assessment tax return. Taxpayers within MTD for Income Tax will still need to complete their tax return, with the quarterly updates forming part of the wider reporting process.
From 6 April 2027, a points-based penalty system is due to be introduced. Taxpayers will receive a penalty point for each missed quarterly deadline, with a £200 fixed penalty applying once four points have been accumulated.
Is MTD for Income Tax relevant to you?
If you’re a sole trader or landlord and you’re unsure whether you need to comply with Making Tax Digital for Income Tax, it’s important not to leave it until the next deadline.
We can help you establish whether MTD applies to you, check your reporting obligations and make sure you’re prepared for the digital record-keeping and quarterly reporting requirements.
If you haven’t yet registered for MTD for Income Tax and think you may be affected, contact us as soon as possible.
