HM Revenue and Customs (HMRC) has issued a blunt reminder that sole traders and landlords with a combined turnover above £50,000 must file their first quarterly update under the Making Tax Digital (MTD) regime by August 7, 2026. The taxman estimates that 864,000 people fall into this initial wave, but early figures show only 250,000 had registered a week after the system went live, with nearly 170,000 of those signed up through tax agents and accountancy firms.
Who Must Comply and What They Need to Do
MTD requires affected taxpayers to use HMRC-approved software to submit digital records of income and expenses every three months, replacing the traditional annual Self Assessment return. Anyone signed up must send an update for each source of income, including self-employment and property income. HMRC is scrambling to bust "myths" about the regime after evidence emerged that huge numbers of those affected have yet to sign up.
In a social media post, HMRC stressed that every three months, taxpayers must use compatible software to provide digital records. The message spelled out who is affected: sole traders and landlords with a combined turnover above £50,000 a year. Campaigners fear the real number of stragglers could run into the hundreds of thousands.
A Long and Troubled Rollout
Making Tax Digital is not new. The project was first consulted on in 2016 as part of HMRC's drive to modernise tax data management. Elements of the scheme, such as MTD for VAT, have been running for years, but the income tax version has been repeatedly deferred due to its complexity. Under the rules finally taking effect this year, taxpayers must ditch pen-and-paper record keeping and log every transaction digitally, submitting running totals to HMRC four times a year.
Officials insist the change gives taxpayers a clearer, more up-to-date picture of what they owe. According to HMRC's guidance, once a quarterly update is filed, users can see an estimate of their tax bill for self-employment and property income in their software or HMRC online services account.
Key Dates and Penalty Grace Period
The first cohort – those already trading with income above £50,000 – must have started keeping digital records from April 6, 2026. Critical dates include: August 7, 2026 – deadline for the first quarterly update; November 7, 2026 – second quarterly update; January 31, 2027 – last "old style" Self Assessment return covering 2025/26; February 7, 2027 – third quarterly update; May 27, 2027 – fourth quarterly update; and January 31, 2028 – first year-end declaration filed directly through MTD software covering 2026/27.
A second wave of taxpayers with lower turnover thresholds will be dragged into the system in the following two years. The Chancellor moved last year to soften the blow, announcing no penalties for filing overdue quarterly updates in the 2026/27 tax year – a concession seen by critics as tacit admission that the system's rollout has been chaotic.
Penalties on the Horizon
While there is a grace period for late quarterly filings this year, taxpayers have been warned not to get complacent. From next year, a new points-based penalty system kicks in, similar to driving licence endorsements – rack up too many points for missed deadlines, and a fixed fine follows. Accountants have urged clients not to leave things until the last minute, warning that errors in the first submission can carry through every later filing, since each quarterly update builds cumulatively on the last rather than standing alone.
For now, HMRC's message to those affected is simple: get signed up, get your software sorted, and don't let August 7 catch you out.
