Category: Making Tax Digital

Sole traders and landlords are increasingly asking what happens if they do not respond to Making Tax Digital sign-up letters. From September 2026, HMRC is beginning a new phase of the rollout by signing up people who need to use MTD for Income Tax for 2026/27 but have not already done so themselves.

This change forms part of the wider MTD for Income Tax requirements for 2026, which include digital record-keeping, quarterly updates and an annual tax return through compatible software.

The main concern is not simply that HMRC may sign you up first. Automatic sign-up relies on information HMRC already holds, so recent changes to your self-employment or property income may not be reflected. Signing up yourself gives you more opportunity to check that your details are correct before quarterly reporting begins.

HMRC reported in August 2026 that more than 570,000 customers had signed up and more than 436,000 had already submitted their first quarterly update.

Key Takeaways

• From September 2026, HMRC is beginning to sign up people who need MTD for Income Tax for 2026/27 but have not signed up themselves.
• The £50,000 threshold is based on qualifying income shown on your 2024/25 Self Assessment return. Qualifying income means gross self-employment and property income before expenses, not profit.
• 11 September 2026 is not a legal sign-up deadline. However, the MTD sign-up service will be unavailable from 5pm on 11 September until 1pm on 15 September for planned maintenance.
• No penalty points will be issued for late quarterly updates during 2026/27, although the updates are still required.
• If your circumstances have changed since your last tax return, checking your details before HMRC completes the sign-up can prevent additional work later.

What is MTD for Income Tax auto-registration?

MTD for Income Tax auto-registration refers to HMRC signing up taxpayers who are required to use Making Tax Digital but have not completed the process themselves.

Making Tax Digital for Income Tax became mandatory from 6 April 2026 for qualifying sole traders and landlords with more than £50,000 of qualifying income.

The underlying obligation has therefore not changed. What has changed is HMRC’s approach to people who remain outside the system despite meeting the criteria.

According to HMRC’s August 2026 MTD update, automatic sign-up will take place in stages over the coming months.

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Who gets auto-registered for MTD?

For the 2026/27 tax year, MTD applies to sole traders and landlords whose qualifying income for 2024/25 was more than £50,000.

HMRC’s qualifying income rules confirm that this is based on gross income before expenses rather than taxable profit.

Tax return used	Qualifying income	MTD starts
2024/25	More than £50,000	6 April 2026
2025/26	More than £30,000	6 April 2027
2026/27	More than £20,000	6 April 2028

For sole traders, this means Making Tax Digital affects more than the way tax is ultimately calculated. It changes how business records are maintained, how income and expenses are reported and how frequently information is submitted to HMRC.

What counts as qualifying income?

Qualifying income generally includes:

• Gross self-employment income before expenses
• Gross property income before expenses
• Income from multiple self-employment or property sources added together
• Certain income from a source that has since ceased, where another qualifying source continues

What does not normally count?

The following income is not included when calculating the MTD qualifying-income threshold:

• Employment income through PAYE
• Dividends
• State Pension or private pension income
• An individual’s share of partnership profit

For example, if you received £27,000 from self-employment and £25,000 in gross rental income during 2024/25, your qualifying income would be £52,000.

You would therefore fall above the £50,000 threshold even if your expenses reduced your taxable profit considerably.

What are the risks of waiting for HMRC to sign you up?

Automatic sign-up does not remove your responsibility to ensure the information held by HMRC is correct.

The biggest issue is that HMRC may be working from your previous Self Assessment return rather than your current circumstances.

Ceased income sources

If you stopped a self-employment activity or ceased receiving income from a property after submitting your previous return, HMRC’s records may still show the old source.

Closing one source does not necessarily mean you are outside MTD if another qualifying source continues.

New income sources

You may also have started a new business or begun receiving rental income since your previous tax return.

If HMRC does not yet hold that information, you may need to add the new source yourself.

All qualifying income has ceased

If you have stopped all self-employment and property activities, contact HMRC rather than assuming an automatic MTD registration can simply be ignored.

HMRC may need to update its records and confirm whether you are still required to use the service.

Software still needs to be arranged

Being signed up by HMRC does not automatically configure accounting software for you.

You still need compatible software, appropriate digital records and a process for submitting quarterly updates.

How do you sign up for MTD for Income Tax yourself?

HMRC’s MTD sign-up guidance explains the information needed to complete the process.

You generally need to be registered for Self Assessment and to have submitted a tax return within the previous two years.

If you sign up yourself, you use the Government Gateway account associated with your Self Assessment record.

Before completing the process, check that you can:

• Confirm the tax year from which MTD applies to you
• Review your self-employment and property income sources
• Add any sources that are missing
• Provide the relevant business or property start dates
• Confirm your business details where required
• Choose suitable MTD-compatible software

If an accountant or tax agent handles the process, they use their own Agent Services Account and the relevant HMRC authorisation rather than your personal Government Gateway password.

What is the MTD service downtime in September 2026?

HMRC has scheduled maintenance for the MTD for Income Tax service from 5pm on Friday 11 September until 1pm on Tuesday 15 September 2026.

This means the service will temporarily be unavailable, but 11 September is not a statutory MTD registration deadline.

HMRC’s current MTD service availability information also lists another maintenance period from 7pm on Saturday 26 September until 9am on Monday 28 September 2026.

If you want to complete your registration before the first maintenance window, you should therefore do so before 5pm on 11 September.

If you have not registered by then, the service is scheduled to reopen on 15 September. The important question is whether HMRC has already completed the automatic sign-up by that point.

What happens if you are late with quarterly updates?

HMRC will not issue penalty points for late quarterly updates during the first mandatory MTD tax year, 2026/27.

That does not mean quarterly updates are optional. Outstanding submissions still need to be dealt with, and separate penalties can apply to late annual tax returns and late tax payments.

From 2027/28, HMRC’s MTD penalty system begins applying to quarterly updates.

Position	Penalty
Each missed quarterly deadline	1 penalty point
4 points accumulated	£200 penalty
Further missed deadline while at threshold	Additional £200 penalty

If you remain below the four-point threshold, a penalty point normally expires 24 months after the missed deadline.

Once the threshold is reached, however, the points do not simply disappear after two years. You generally need to complete a period of compliance and bring outstanding submissions up to date before the points are reset.

If you missed the first quarterly update in August 2026, dealing with it early is preferable to allowing reporting problems to accumulate. This may involve correcting your MTD records and checking that your bookkeeping is ready for the next submission.

Are there exemptions from MTD for Income Tax?

Yes. Some taxpayers may be exempt from Making Tax Digital.

One important category is digital exclusion. This can apply where it is not reasonably practical for someone to use digital tools because of factors such as:

• Age
• Disability
• Health conditions
• Religious beliefs
• Lack of suitable internet access
• Other circumstances making digital reporting unreasonable

HMRC’s MTD exemption guidance explains who may qualify and how applications are considered.

Being exempt from MTD does not mean the underlying income no longer needs to be reported. You must still meet your normal Self Assessment obligations.

If you are already using MTD and your qualifying income later falls below the threshold, one lower-income year will not usually remove you from the system immediately.

HMRC generally requires qualifying income to remain below the relevant threshold for three consecutive tax years before you can choose to leave MTD, subject to the circumstances applying to you.

How should sole traders and landlords prepare for the next thresholds?

MTD will expand further over the next two years.

From 6 April 2027, individuals with qualifying income above £30,000 will be brought into the system based on their 2025/26 tax return.

From 6 April 2028, the threshold will fall again to more than £20,000 based on qualifying income for 2026/27.

If your income falls into these ranges, preparation should start before the mandatory date.

Practical steps include:

• Checking your gross self-employment and property income
• Making sure all relevant income sources appear correctly on your Self Assessment return
• Choosing compatible software in advance
• Keeping business and property records digitally
• Reconciling records regularly rather than waiting until a quarterly deadline
• Confirming your MTD start date with your accountant

Consistent digital bookkeeping can make this easier by keeping income, expenses and supporting records organised throughout the year.

This becomes especially important because errors made during routine record-keeping can carry through into quarterly updates and ultimately affect the annual tax return.

Voluntary MTD sign-up is also available before your mandatory start date, but it should not be treated simply as a consequence-free trial. Once you enter the system, you need to understand the digital record-keeping and reporting obligations that apply.

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Frequently Asked Questions

What if HMRC auto-registers me with the wrong details?

Check your MTD account as soon as you receive confirmation that HMRC has signed you up.

Automatic registration relies on information HMRC already holds, so changes made since your most recent tax return may not appear immediately.

Some details can be updated through the service, while more significant changes may require you to contact HMRC.

Do I still need to file a Self Assessment tax return under MTD?

Yes.

Quarterly updates do not replace your annual tax return. MTD users still complete an annual Self Assessment tax return through compatible software.

Other income, gains, allowances and reliefs that are not included in the quarterly updates are dealt with before the final return is submitted.

Can my accountant sign me up for MTD?

Yes.

An authorised accountant or tax agent can complete the registration process on your behalf using HMRC’s agent services.

They can also check that your income sources are correctly listed, connect suitable software and manage ongoing quarterly reporting.

How much does MTD-compatible software cost?

Costs vary depending on the provider and the features you need.

Some platforms are designed for straightforward sole-trader bookkeeping, while others include invoicing, bank feeds, receipt capture, property management and more advanced accounting features.

The important point is that the software must be compatible with MTD for Income Tax and suitable for the records you need to maintain.

What happens if I miss the 11 September sign-up date?

Nothing automatically happens simply because 11 September passes.

It is not a legal MTD sign-up deadline.

The significance of the date is that HMRC’s sign-up service is scheduled to become unavailable from 5pm on 11 September until 1pm on 15 September.

When the service reopens, you can still sign up if HMRC has not already completed the process on your behalf.

Will MTD for Income Tax apply to limited companies?

No.

MTD for Income Tax applies to individuals with qualifying self-employment or property income, including sole traders and landlords.

Limited companies have separate Corporation Tax and VAT obligations.

However, a company director may still fall within MTD personally if they also receive sufficient qualifying self-employment or property income.

How Apex Accountants Can Help

If you are unsure whether HMRC has already signed you up, whether your income sources are correct or whether your records are ready for quarterly reporting, our Making Tax Digital accountants can help with registration, software setup and ongoing submissions.

MTD should also be considered alongside your wider personal tax position, particularly where you receive income from several sources or have additional Self Assessment obligations.

If you want to confirm where you stand before HMRC completes an automatic sign-up or before the next quarterly deadline, you can book a consultation to review your qualifying income, current registration position and MTD setup.

A sole trader may have completed the first MTD quarterly update without realising that the next deadline is already approaching. A landlord with a second income stream may also be above the threshold once both sources are combined. Making Tax Digital for Income Tax 2026 is no longer a distant reform: for the first mandatory group, the rules began on 6 April 2026.

This guide explains who is in scope, what has changed, which deadlines matter, and what to do if your records or software are not ready. It is based on current HMRC guidance checked on 28 August 2026. If you want professional support with setup and ongoing reporting, Apex Accountants’ Making Tax Digital accountants can help you prepare and manage the process.

Key Takeaways

• Sole traders and landlords with qualifying income over £50,000 for 2024–25 should have started using MTD from 6 April 2026.
• The next start dates are 6 April 2027 for qualifying income over £30,000 in 2025–26 and 6 April 2028 for qualifying income over £20,000 in 2026–27.
• Quarterly updates are sent through compatible software and are cumulative. They do not replace the annual Self Assessment tax return.
• HMRC will not apply penalty points for late quarterly updates during 2026–27, but digital records and quarterly updates are still required.
• From September 2026, HMRC will start signing up people who need to use MTD for 2026–27 but have not already signed up, with enrolment taking place in stages.

What Is Making Tax Digital for Income Tax 2026?

Making Tax Digital for Income Tax requires qualifying sole traders and landlords to keep digital records and send quarterly updates to HMRC using compatible software. The updates provide HMRC with totals of self-employment and property income and expenses during the year, while the taxpayer still submits one annual Self Assessment tax return.

The obligation applies to people registered for Self Assessment who receive income from self-employment, property, or both and whose qualifying income exceeds the relevant threshold. HMRC’s official MTD eligibility guidance explains who needs to use the service and when.

MTD does not mean paying Income Tax four times a year. Quarterly updates are reporting obligations, not tax returns or payment demands. The normal Self Assessment payment timetable remains in place, with the full tax bill generally due by 31 January following the end of the tax year.

Who Must Use MTD for Income Tax and When?

You need to use MTD if you are a sole trader or landlord registered for Self Assessment, receive self-employment or property income, and your qualifying income is more than the relevant threshold for the tax year.

Qualifying income used by HMRC	MTD start date	Practical position
More than £50,000 in 2024–25	6 April 2026	The first mandatory group should already be using MTD
More than £30,000 in 2025–26	6 April 2027	Preparation should begin before the 2027–28 tax year
More than £20,000 in 2026–27	6 April 2028	The threshold widens the MTD population further

Qualifying income is your total gross income from self-employment and property before expenses. If you have more than one relevant income source, those amounts are normally combined. HMRC explains the calculation in its guidance on working out qualifying income for MTD. You can also read Apex Accountants’ guide to Making Tax Digital income thresholds for a practical explanation of how the thresholds operate.

Partnerships do not currently need to use MTD for Income Tax as partnerships. HMRC says it will set out their timetable at a later date. A partner’s share of partnership profit also does not count towards that individual’s qualifying income, although their separate personal self-employment or property income may still bring them into scope.

Once you have started using MTD, falling below the threshold for one year does not automatically remove the obligation. HMRC says you can choose to opt out if your qualifying income remains below the relevant threshold for three tax years in a row. Different rules can apply if all self-employment or property income sources cease, so your position should be checked rather than assumed.

How Do Quarterly Updates Work for Sole Traders and Landlords?

Quarterly updates are totals of your self-employment and property income and expenses created from your digital records. HMRC’s current rules make these updates cumulative, meaning each update covers from the start of the tax year to the end of that update period. If you correct your digital records, the correction can flow through a later cumulative update without having to resend every earlier update.

For taxpayers using standard tax-year update periods, HMRC lists the following dates for 2026–27:

Cumulative period covered	Quarterly update deadline
6 April to 5 July 2026	7 August 2026
6 April to 5 October 2026	7 November 2026
6 April 2026 to 5 January 2027	7 February 2027
6 April 2026 to 5 April 2027	7 May 2027

You can check the full rules, including calendar update periods, in HMRC’s quarterly update guidance.

A quarterly update is only an in-year report. It does not complete your Self Assessment. After the end of the tax year, you still need to check the full-year information, make any necessary adjustments, add other income or gains, claim relevant reliefs and allowances, and submit your tax return through compatible software. For the 2026–27 tax year, the tax return and tax payment are due by 31 January 2028.

What Records and Software Do You Need?

You need digital records for the self-employment and property income and expenses covered by MTD. HMRC requires each digital income or expense record to include the:

• amount
• date the income was received or the expense was incurred
• relevant income or expense category

You must also continue keeping the supporting records you normally retain for Self Assessment, such as invoices and bank statements. HMRC’s guidance on creating digital records for MTD explains the detailed record-keeping requirements.

If you use more than one software product, the products used to create your digital records and make submissions must be digitally linked. If you use a single product for the whole process, no separate digital link between products is needed.

HMRC does not provide the bookkeeping software itself. You or your agent must use software that works with MTD for Income Tax to create and store records, send quarterly updates, and submit the annual tax return. You can review HMRC’s guidance on choosing MTD-compatible software or use its MTD software finder.

You can continue using spreadsheets, but a spreadsheet on its own cannot submit the required information to HMRC. You will need compatible bridging software or another compatible product that connects to the spreadsheet. If keeping digital records accurately is becoming difficult, Apex Accountants’ bookkeeping services can help keep income and expenses organised throughout the year.

What Happens If You Miss an MTD Deadline in 2026–27?

HMRC has confirmed that it will not apply penalty points for late quarterly updates during the 2026–27 tax year. You still need to keep digital records and send any outstanding quarterly updates before you can submit your tax return.

This temporary treatment only applies to quarterly update penalties. Penalty points can still apply to a late tax return, and separate late-payment rules apply if tax is not paid on time. HMRC’s MTD penalty guidance confirms that late-payment interest runs from the first day a payment is late.

For your first year under the new late-payment penalty regime, HMRC gives you 30 days from the payment due date to either pay in full or contact HMRC to arrange a payment plan before late-payment penalties start. This 30-day period is available only once; after the first year, the initial period reduces to 15 days.

For tax years after 2026–27, missed quarterly update deadlines can generate late-submission penalty points. The threshold for mandatory MTD quarterly obligations is four points. Reaching four points triggers a £200 penalty, and each further missed submission deadline while at the threshold can trigger another £200 penalty.

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What Should You Do If You Are Not Ready for MTD?

If you are already in the first mandatory group:

1. Check your qualifying income against the correct tax year.
2. Confirm that your Self Assessment details and income sources are up to date.
3. Choose compatible software or appoint an authorised tax agent.
4. Reconcile bank transactions, self-employment income, rental income and expenses.
5. Correct any inaccurate digital records and keep a clear audit trail.
6. Send any outstanding quarterly update as soon as possible.
7. Prepare for the next quarterly deadline rather than waiting until the filing date.

From September 2026, HMRC will start signing up people who need to use MTD for the 2026–27 tax year but have not already signed up. HMRC says this will happen in stages. If HMRC enrols you, its guidance explains what to do after HMRC has signed you up for MTD.

Even if you have not received a letter, you remain responsible for checking whether the rules apply to you.

Some taxpayers are exempt. This includes certain people who are digitally excluded, as well as a number of automatic and temporary exemption categories. HMRC’s MTD exemption guidance explains the current rules. Being exempt from MTD does not remove the requirement to report taxable income and gains through Self Assessment.

How Can an Accountant Help With MTD for Income Tax?

An accountant can check the threshold calculation, review mixed self-employment and property income, recommend suitable software, and create a process for keeping records and meeting each quarterly deadline.

This can be particularly useful where you have several income sources, jointly owned property, changing business activities, or records spread across different bank accounts and systems. A regular review can identify missing expenses, duplicated transactions and income assigned to the wrong activity before the figures reach HMRC.

Professional support can also help keep quarterly updates consistent with the final Self Assessment tax return and make sure adjustments and reliefs are dealt with at the correct stage.

How Apex Accountants Help

If you are a sole trader or landlord affected by Making Tax Digital for Income Tax 2026, the immediate priorities are confirming your threshold, setting up a compliant digital record-keeping process and preparing your next quarterly update.

Apex Accountants can help with:

• checking whether and when MTD applies to you
• software selection and setup
• digital record keeping and bookkeeping
• quarterly update preparation
• Self Assessment tax-return preparation
• ongoing deadline and compliance support

If you are unsure whether your current setup is ready, you can book a free consultation to review your position with Apex Accountants.

The Sensible Next Step

If you are a sole trader or landlord affected by Making Tax Digital for Income Tax 2026, confirm your qualifying income, check that your software and digital records meet HMRC requirements, and prepare for the next quarterly deadline now.

If you have missed an update or are unsure whether your records are accurate, deal with the issue while the 2026–27 quarterly-update penalty easement is still in place rather than allowing problems to build up before the next tax year.

Frequently Asked Questions

Can I Still Sign Up for MTD If I Missed the First Quarterly Deadline?

Yes. If you are required to use MTD and have not signed up yet, you should sign up and catch up with your digital records and quarterly updates as soon as possible. HMRC will not apply penalty points for late quarterly updates during 2026–27, but the reporting requirement still applies.

Does MTD Replace My Self Assessment Tax Return?

No. Quarterly updates are summaries, not tax returns. You still submit one Self Assessment tax return each tax year. Once you are using MTD, the return must be completed and submitted through compatible software by 31 January following the end of the relevant tax year.

Do Landlords With One Property Need MTD Software?

Possibly. The number of properties is not the test. A landlord may need MTD if their total qualifying income from property and self-employment exceeds the relevant threshold and the other conditions are met.

For UK property, HMRC generally treats one or more UK properties as a single UK property business for MTD record-keeping purposes.

What If My Income Is Close to £50,000?

Use your actual qualifying income rather than profit or a rounded monthly estimate. Qualifying income is generally the gross amount from self-employment and property before expenses, based on the relevant Self Assessment tax return. Include the relevant sources together when checking whether you exceed the threshold.

Do I Need an Accountant for Making Tax Digital for Income Tax 2026?

No. An accountant is not legally required. However, you do need compatible software and must meet the digital record-keeping, quarterly update and annual tax-return requirements if MTD applies to you. An accountant can help reduce the risk of software setup errors, incorrect categorisation and missed reporting obligations.

What Happens If I Get the Figures Wrong?

You should correct inaccurate digital records as soon as you identify the error. Because quarterly updates are cumulative, corrected records can be reflected in a later update without resending every earlier quarterly update. Before submitting your annual tax return, you should check that the full-year figures are correct and make any required adjustments.

A client came to Apex Accountants last week, a sole trader with two income streams, unsure whether she had met her first Making Tax Digital obligation correctly. She had filed her quarterly update on time, but when we reviewed her records, several property expenses were miscategorised and one invoice was duplicated. The submission was technically complete, but the figures feeding into her year-end tax return were already drifting.

This is the reality for many sole traders and landlords right now. HMRC says more than 436,000 people submitted their first quarterly update for 2026-27, and over 570,000 have signed up to the service. But submitting on time and getting the records right are two different things. If you are in scope of MTD for Income Tax, the work does not stop after the first deadline.

Key Takeaways

• First quarterly update deadline was 7 August 2026 – covering 6 April to 5 July 2026 (standard period)
• No penalty points for late quarterly updates during the 2026-27 tax year, but late Self Assessment returns and late payments still carry penalties
• Next quarterly update deadline: 7 November 2026 – covering 6 April to 5 October 2026
• From September 2026, HMRC will start signing up eligible taxpayers automatically if they have not signed up themselves
• From April 2027, MTD will apply to those with qualifying income over £30,000, down from over £50,000 for 2026-27

What happens after you submit your first MTD quarterly update?

After your first quarterly update is submitted through compatible software, HMRC has a summary of your income and expenses for that three-month period. You can view an estimate of your tax position through your software, and the figures you submitted will feed into your annual Self Assessment tax return. Nothing else is due immediately – the next action point is the second quarterly update, due by 7 November 2026.

However, the submission itself does not guarantee your records are accurate. If your digital records contain miscategorised expenses, duplicated entries, or missing income, those errors flow through to every subsequent update and into your final tax return. The best time to check is now, while the first period is fresh and corrections are straightforward. This is where professional bookkeeping services become valuable – ensuring your digital records are accurate from the start prevents compounding errors across all four quarterly updates.

What should you do if you missed the 7 August deadline?

If you missed the first quarterly update deadline, you should submit the outstanding update through your MTD-compatible software as soon as possible. HMRC has confirmed that no penalty points will be issued for late quarterly updates during the 2026-27 tax year, so there is no financial penalty for the delay – but the update is still legally required, and leaving it outstanding creates a larger backlog when the next deadline arrives.

The practical steps are:

• Open your MTD software and locate the missing quarterly update for the period 6 April to 5 July 2026.
• Review your digital records for that period – bank transactions, invoices, property income, expense receipts.
• Check that income and expenses are categorised correctly before submitting. If you use bookkeeping software that feeds into your MTD tool, verify the categories match.
• Submit the update through your software. HMRC will process it and update your tax position.
• Set a reminder for 7 November 2026 – the next quarterly update deadline.

If you are unsure whether MTD applies to you at all, check your qualifying income. The threshold for 2026-27 is over £50,000 from self-employment and property income combined. For a full breakdown of how the rules work, our Making Tax Digital services page explains the scope, thresholds, and what Apex Accountants does to keep clients compliant. You can also read our earlier guide on the rules for MTD for Income Tax for a deeper look at how quarterly updates interact with Self Assessment.

How do quarterly updates differ from the annual Self Assessment return?

Quarterly updates are short digital summaries of your income and expenses, sent every three months through MTD-compatible software. They are not tax returns, and no tax is payable because of a quarterly update. The annual Self Assessment tax return remains due by 31 January, and quarterly updates must be submitted to be able to file the final return.

The distinction matters because some taxpayers assume that filing quarterly updates means their tax return is done. It is not. The quarterly updates feed into the annual return, but you still need to review the full year, make any tax adjustments (capital allowances, private use adjustments, pension relief), and submit your tax return by 31 January 2028 for the 2026-27 tax year.

What are the MTD penalty rules for 2026-27 and beyond?

For the 2026-27 tax year, HMRC will not issue penalty points for late quarterly updates. This is a transitional arrangement to help taxpayers adjust to the new system. However, penalties for late Self Assessment returns and late tax payments still apply under the relevant rules – these are separate from the quarterly update penalty rules.

From 6 April 2027, a points-based penalty system will apply to missed quarterly deadlines. Taxpayers receive one penalty point for each missed quarterly deadline. Once four points are accumulated, a fixed £200 penalty is charged, and every further late submission after that triggers another £200 penalty. Points below the threshold expire automatically 24 months after the missed deadline. Once the threshold is reached, points reset to zero after quarterly updates and the tax return are submitted on time for 12 months and any outstanding quarterly updates and tax returns for the previous 24 months have been submitted.

When does HMRC start signing people up automatically?

From September 2026, HMRC will begin signing up customers who should be using MTD for Income Tax for the 2026-27 tax year but have not yet done so. This will happen in stages over the coming months. HMRC published guidance on 24 August 2026 explaining what taxpayers need to do if they receive confirmation that they have been signed up automatically.

Taxpayers who sign up themselves have the advantage of choosing their software, checking their details are correct from the start, and preparing in their own time. Waiting for HMRC to sign you up means you may have less control over the process and less time to prepare.

How can you prepare for the next quarterly update deadline?

The second quarterly update covers the period 6 April to 5 October 2026, with a deadline of 7 November 2026. To prepare, you should review your digital records monthly rather than leaving everything to the deadline. This gives you time to investigate unusual figures, confirm categorisations, and ensure your software is connected to the correct HMRC account.

If you have more than one income stream – for example, self-employment income and property income – you need to send a separate quarterly update for each self-employment and property business. If you are a landlord with rental properties, confirm that your property income and expenses are being recorded separately from any self-employment activity.

Checklist for the next deadline:

• Confirm your software is still connected to HMRC and recognised for MTD for Income Tax
• Review your records monthly for the cumulative period 6 April to 5 October 2026
• Check income categorisation – separate self-employment from property income if you have both
• Verify expense categories – ensure costs are allocated to the correct income source
• Submit before 7 November 2026 to stay ahead of the deadline

How Apex Accountants Help with MTD for Income Tax

The client mentioned at the start of this article is not unusual. Many sole traders and landlords have submitted their first quarterly update but are unsure whether their records are accurate, whether their categorisations are correct, or whether they are fully prepared for the next deadline. That is the gap we fill.

Our approach to MTD for Income Tax is practical, not theoretical. We start by reviewing your current software setup and digital records to identify any errors, miscategorisations, or gaps before they compound across quarterly updates. For clients with multiple income streams – particularly those with both self-employment and property income – we ensure each source is tracked separately and correctly allocated.

Specifically, we help with:

• Software selection and setup – we confirm your MTD-compatible software is correctly connected to HMRC and configured for your income sources
• Digital record review – we check your categorisations, identify duplicated entries, and correct errors from previous quarters
• Quarterly update preparation – we prepare and review each quarterly update before submission so your figures are accurate
• Year-end tax planning – we handle the adjustments (capital allowances, private use apportionments, pension relief) that quarterly updates do not cover
• Ongoing compliance – we track your deadlines, monitor threshold changes (including the move to qualifying income over £30,000 in April 2027), and keep you ahead of HMRC requirements

If you have submitted your first quarterly update and want to make sure your records are accurate before the next deadline, our Making Tax Digital services page explains exactly what we do. For broader support with digital record keeping and categorisation, our bookkeeping services are built around keeping your MTD submissions accurate throughout the year.

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Frequently Asked Questions

Do I need an accountant for MTD quarterly updates?

You are not legally required to use an accountant for MTD, but many sole traders and landlords find professional support valuable – particularly if you have multiple income streams, property income, or complex expenses. An accountant can review your software setup, verify your categorisations, and ensure your quarterly figures are accurate so your year-end tax return is correct.

What happens if I get my quarterly update figures wrong?

If you discover an error after submitting a quarterly update, you can correct it in the next quarterly update. The figures are cumulative – each update builds on the previous one – so corrections made in a subsequent period will flow through to your annual return. However, it is better to get the figures right at source by reviewing your records regularly rather than relying on later corrections.

Will I be fined for submitting my first quarterly update late?

No. HMRC has confirmed that no penalty points will be issued for late quarterly updates during the 2026-27 tax year. This transitional arrangement means you will not face a points-based penalty for missing the 7 August deadline. However, you are still required to submit the update, and penalties for late Self Assessment returns and late tax payments still apply under the relevant rules.

How much does MTD-compatible software cost?

MTD-compatible software costs vary depending on the provider and the features you need. Some providers offer basic MTD-compliant packages for sole traders, while others charge more for features like automated bank feeds, receipt scanning, and multi-property tracking. HMRC publishes a list of compatible software on GOV.UK, which includes both free and paid options.

What if I have both self-employment and property income?

You need to send a separate quarterly update for each self-employment and property business. If you earn above the £50,000 threshold from combined self-employment and property income, you are in scope of MTD for Income Tax. The qualifying income calculation is based on gross income from these sources, not profit, so you need to check carefully whether you meet the threshold.

Does MTD apply if my income is below £50,000?

For the 2026-27 tax year, MTD for Income Tax applies to sole traders and landlords with qualifying income above £50,000. From April 2027, it will apply to those with qualifying income above £30,000. If your income is below the current threshold, you are not required to use MTD yet, but you may choose to sign up voluntarily to get ahead of the change.

We are increasingly asked the same question by clients who have heard about Making Tax Digital but are not sure whether the deadline applies to them or what happens if they do nothing. The answer, as of August 2026, is straightforward: if you are a sole trader or landlord with qualifying income over £50,000 from self-employment or property shown on your 2024-25 tax return and you are not exempt, you are already legally required to use MTD for Income Tax – and from September, HMRC will start signing people up automatically if they have not done so themselves.

HMRC announced on 12 August 2026 that more than 436,000 sole traders and landlords have successfully submitted their first quarterly update under Making Tax Digital for Income Tax, with over 570,000 customers signed up to the service. That is a significant milestone, and HMRC has also confirmed that there are customers who need to use MTD but have not yet signed up – and HMRC is about to take matters into its own hands.

Key Takeaways

• 436,000+ sole traders and landlords have submitted their first MTD quarterly update
• 570,000+ customers have signed up to the MTD service
• From September 2026, HMRC will begin automatic sign-ups in stages for eligible taxpayers who have not signed up themselves
• Threshold for 2026-27: qualifying income over £50,000 from self-employment and property
• From April 2027: threshold drops to over £30,000 – more taxpayers will be brought into scope
• No penalty points for late quarterly updates during 2026-27, but late Self Assessment and late payment penalties still apply

What does the 436,000 figure actually mean?

The figure represents sole traders and landlords who successfully submitted their first quarterly update for 2026-27. HMRC published the figure in its 12 August announcement. The first quarterly update deadline was 7 August 2026. HMRC confirmed that the first quarterly update covered 6 April to 5 July 2026 for standard update periods. For calendar periods, it covered 1 April to 30 June 2026.

Separately, the 570,000 figure includes taxpayers who have registered for MTD. Some may not yet have submitted their first update. The gap between 436,000 submissions and 570,000 sign-ups suggests tens of thousands of people are registered but have not yet completed their first filing.

For more detail on the first reporting period and deadlines, see our guide to the first Making Tax Digital quarterly update deadline.

Who needs to sign up for MTD for Income Tax?

MTD for Income Tax applies to sole traders and landlords with qualifying income over £50,000 for the 2026-27 tax year. ‘Qualifying income’ means the gross income from self-employment and property – not profit. If you have multiple income sources, you need to add them together to check whether you exceed the threshold.

The threshold will change over the next year. It is over £50,000 for 2026-27 and drops to over £30,000 from April 2027. This means many more taxpayers will be brought into scope next year. If you are close to the current threshold, it is worth preparing now rather than waiting.

What happens when HMRC starts signing people up automatically in September?

From September 2026, HMRC will begin enrolling customers who need to use MTD for Income Tax. This applies to eligible taxpayers who have not yet signed up. This will happen in stages over the coming months.

HMRC published new guidance on 24 August 2026 explaining what taxpayers need to do after HMRC signs them up automatically.

The key difference between signing up yourself and being signed up by HMRC is control. If you sign up yourself, you choose your software, verify your details, and prepare on your own timeline. If HMRC signs you up, you may have less time to prepare and catch up on any outstanding requirements. For those who want to get their digital records right from the start, professional bookkeeping services can set up your software, categorise your income sources correctly, and ensure your first quarterly update is accurate.

What is a quarterly update and how is it different from a tax return?

A quarterly update is a short digital summary of your business income and expenses. You send it every three months through MTD-compatible software.It takes minutes to complete once your records are in order. It is not a tax return, and submitting an update does not create a tax payment. Your Self Assessment deadline of 31 January remains unchanged.

The quarterly updates feed into your annual tax return. When you come to file your Self Assessment, the income and expense information from your quarterly updates will feed into the year-end process. You then make any year-end adjustments (capital allowances, private use apportionments, pension relief) and submit the tax return.

Some taxpayers use calendar update periods instead. These are also cumulative: 1 April to 30 June, 1 April to 30 September, 1 April to 31 December, and 1 April to 31 March. The deadline for all customers is the same regardless of which period they use.

For a deeper look at how quarterly updates work alongside Self Assessment, read our earlier guide on the rules for MTD for Income Tax.

What are the penalties for not complying with MTD?

For the 2026-27 tax year, HMRC has confirmed that it will not issue penalty points for late quarterly updates. This is a transitional arrangement to help taxpayers adjust. However, penalties for late Self Assessment tax returns and late tax payments still apply – these are separate systems.

From 6 April 2027, a points-based penalty system will apply to missed quarterly deadlines: one point is given for each missed quarterly update deadline, and four points trigger a fixed £200 penalty. A further £200 penalty can apply for each additional missed submission while you remain at the penalty threshold.

If you are below the four-point threshold, individual penalty points normally expire 24 months after the missed deadline. Once you reach the threshold, the points do not simply expire after a period of compliance. To reset them, you generally need to meet your filing deadlines for 12 months. You must also submit outstanding quarterly updates and tax returns from the previous 24 months.

This means the 2026-27 tax year provides a grace period for quarterly update penalty points – but not for late tax returns or late tax payments. Use this year to get your systems right so you are not accumulating points from April 2027 onwards.

How do you choose the right MTD-compatible software?

Choose MTD-compatible software that HMRC recognises. It must also submit quarterly updates directly to HMRC’s systems.

When choosing software, consider:

• Number of income sources – if you have both self-employment and property income, confirm the software supports multiple income streams
• Bank feeds and automation – some packages connect directly to your bank to import transactions
• Property-specific features – landlords with multiple properties may prefer software that allows individual properties to be tracked separately
• Agent access – if you use an accountant, check whether the software allows your agent to access and review your records
• Cost – basic packages may be sufficient for simple sole traders, while complex income structures may need more advanced features

Are there any exemptions from MTD for Income Tax?

Yes. HMRC provides various exemptions from MTD for Income Tax, including for taxpayers who are digitally excluded. Other exemptions may apply based on specific circumstances. If you believe you may be exempt, you should check HMRC’s exemption guidance and, if necessary, seek professional advice rather than assuming you are outside the scope of the rules.

The Apex Accountants View: Why Acting Before September Matters

We have been preparing clients for Making Tax Digital for Income Tax since the rules were first announced. We consistently see better results among clients who prepare early. Those who sign up themselves also have more time to organise their records before HMRC enrols them. The 436,000 figure shows that the system is working. However, there is still a substantial gap between the 436,000 submissions and 570,000 sign-ups. Thousands of people have registered but have not yet filed. HMRC has also confirmed that some eligible customers have not signed up.

Our recommendation is simple: if you think you are in scope, act now. Do not wait for HMRC to send you a letter in September. Signing up yourself gives you more control over the process. You can choose your software, organise your digital records, and check your categorisations before the next deadline. Waiting means you lose some of that preparation time.

Here is what we do for clients who come to us at this stage:

• Eligibility assessment – we calculate your qualifying income across all sources to confirm whether you are in scope, including the over £50,000 threshold for 2026-27 and the over £30,000 threshold from April 2027
• Software selection – we help you choose MTD-compatible software that fits your income structure, whether you are a sole trader, landlord, or both
• Digital record setup – we configure your software with the correct income categories, expense types, and property tracking if applicable
• First quarterly update support – we prepare and review your first quarterly update to ensure accuracy from the start, preventing compounding errors
• Ongoing MTD compliance – we track your deadlines, monitor threshold changes, and keep you ahead of HMRC requirements throughout the year

If you have not yet signed up for MTD, or you are unsure whether the threshold applies to you, our Making Tax Digital services page explains what we do in detail. For clients who need help getting their digital records in order before signing up, our bookkeeping services cover everything from software setup to ongoing categorisation.

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Frequently Asked Questions

Do I need an accountant to sign up for MTD?

You can sign up for MTD yourself through GOV.UK, without needing an accountant. However, professional support may help if you have multiple income streams or complex expenses. It can also save time if you are unsure whether you meet the qualifying income threshold. An accountant can also help you choose the right software and set up your digital records correctly from the start.

What happens if HMRC signs me up and I was not expecting it?

If HMRC signs you up automatically, you will receive communication explaining what you need to do. HMRC published guidance on 24 August 2026 for taxpayers who are signed up automatically. You will need to get MTD-compatible software, set up or update your digital records, and submit any outstanding quarterly updates. Acting before September gives you more time to prepare on your own terms.

Is qualifying income the same as profit?

No. HMRC calculates your qualifying income using your gross income from self-employment and property. This means your turnover before expenses. Profit is what remains after deducting allowable expenses. You could have a profit below £50,000 but still be in scope of MTD if your gross income exceeds the threshold. This is a common source of confusion, so check the calculation carefully.

What if my income fluctuates above and below £50,000?

HMRC uses your qualifying income from the relevant previous tax return to determine when you enter MTD. If your qualifying income exceeded £50,000 in 2024-25, you must use MTD for 2026-27. An exemption or another relevant rule may exclude you. Your circumstances may change after you start using MTD. If your qualifying income stays below the relevant threshold for three consecutive tax years, you may be able to opt out. You should check HMRC guidance rather than assuming that falling below the threshold for one year automatically takes you out of MTD.

Can I use MTD voluntarily if my income is below £50,000?

Yes. If you are eligible, you can sign up voluntarily for MTD for Income Tax even if your income is below the current mandatory threshold. Voluntary sign-up can help you get used to the system before MTD becomes mandatory for you. This may be useful if your income is close to £50,000. It may also help if the lower threshold from April 2027 is likely to bring you into scope.

How much does it cost to get help with MTD setup?

The cost of professional MTD support depends on your circumstances. Your income structure, number of income sources, and record complexity can all affect the price. A consultation with Apex Accountants will give you a clear assessment of what you need and a fixed quote based on your specific circumstances.

We are increasingly hearing from sole traders and landlords who know that Making Tax Digital started in April but remain unsure what must be sent to HMRC in August. The first making tax digital quarterly update must be submitted by 7 August 2026 by individuals who entered MTD for income tax on 6 April 2026.

HMRC says more than 864,000 sole traders and landlords are within the first phase of the system. The update is not a completed tax return, and no tax payment is due solely because the quarterly submission has been made.

Quick Answer

• The first quarterly update is due by 7 August 2026.
• It normally covers records from 6 April to 5 July 2026.
• Those using calendar quarters will report from 1 April to 30 June 2026.
• The update contains cumulative income and expense category totals for each relevant business.
• HMRC will not issue quarterly-update penalty points during 2026/27, but all four updates must still be submitted before the annual tax return can be filed.

What Is the First Making Tax Digital Quarterly Update?

The first Making Tax Digital quarterly update is a digital summary of income and expense records for the opening part of the 2026/27 tax year. It must be sent to HMRC through compatible software by 7 August 2026.

It is a summary rather than a tax return. Taxpayers do not normally need to make year-end accounting adjustments, capital allowance claims, or other tax adjustments before submitting it.

The software adds together the digital records entered for each income and expense category. HMRC receives category totals, not individual invoices, receipts, or bank transactions.

Who Must Submit an Update by 7 August 2026?

The deadline applies to sole traders and landlords who were required to begin using MTD for income tax on 6 April 2026. This generally means all the following conditions apply:

• The individual is registered for self-assessment.
• They receive income from self-employment, property, or both.
• Their qualifying income was more than £50,000 in the 2024/25 tax year.
• They do not have an automatic or HMRC-approved exemption.

HMRC should have written to taxpayers it identified as being within scope. However, not receiving a letter does not remove the responsibility to check qualifying income and sign up.

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How Is Qualifying Income Calculated for MTD?

Qualifying income is the total gross income from self-employment and property before expenses are deducted. Income from several sole trades and property businesses is combined when testing the threshold.

The phased thresholds are

Income Shown on Tax Return	Qualifying Income	MTD Start Date
2024/25	More than £50,000	6 April 2026
2025/26	More than £30,000	6 April 2027
2026/27	More than £20,000	6 April 2028

These are gross-income thresholds, not profit thresholds. A business can therefore be within MTD even where deductible expenses leave a comparatively small taxable profit.

Qualifying income does not normally include:

• Employment income taxed through PAYE
• Dividends, including dividends from the individual’s own company
• State or private pension income
• An individual partner’s share of partnership profits

A person’s share of income from a jointly owned property normally counts. For example, if a jointly owned property generates £50,000 of rent and two owners are entitled to equal shares, each person would generally have £25,000 of qualifying property income.

Worked Example

A sole trader reported £36,000 of gross trading income and £18,000 of gross rental income in 2024/25.

Their combined qualifying income is £54,000. They are therefore within the first MTD phase, even if business and property expenses reduce their total taxable profit below £50,000.

What Must Be Included in Quarterly Updates for Making Tax Digital?

The quarterly updates for making tax digital must include cumulative totals for the income and expense categories recorded in compatible software. A separate update is generally required for each self-employment and property business.

The submission may therefore contain totals for categories such as

• Sales or business income
• Rental income
• Staff costs
• Travel costs
• Premises expenses
• Professional fees
• Repairs and maintenance
• Other allowable business expenses

The categories broadly follow those used for self-assessment. The first update does not require every figure to be final or adjusted for tax purposes.

Even where a business has received no income and incurred no expenses during the period, an update must still be submitted to tell HMRC that there was no activity.

For jointly-let properties, HMRC allows taxpayers to include either income and expenses or income only during the quarterly cycle. Expenses omitted from the quarterly updates must be added after the tax year by resending the fourth update before submitting the annual tax return.

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Which Period Does the First Update Cover?

The standard first update covers cumulative records from 6 April to 5 July 2026. Taxpayers using calendar update periods report records from 1 April to 30 June 2026 instead.

The deadline is 7 August 2026 under either method.

Reporting Method	First Update Period	Submission Deadline
Standard tax-year periods	6 April to 5 July 2026	7 August 2026
Calendar periods	1 April to 30 June 2026	7 August 2026

Calendar periods may be more practical where accounts are prepared to 31 March. They must be selected in the software for each income source before the first update is submitted.

Once the first update has been sent, the reporting-period method cannot be changed for that tax year.

Which Making Tax Digital Submission Dates Follow the First Deadline?

The four Making Tax Digital submission dates for the 2026/27 tax year are 7 August 2026, 7 November 2026, 7 February 2027 and 7 May 2027.

Each update is cumulative. This means the second standard update covers 6 April to 5 October, rather than covering only the three months from July to October.

Update	Standard Cumulative Period	Calendar Cumulative Period	Deadline
First	6 April to 5 July 2026	1 April to 30 June 2026	7 August 2026
Second	6 April to 5 October 2026	1 April to 30 September 2026	7 November 2026
Third	6 April 2026 to 5 January 2027	1 April to 31 December 2026	7 February 2027
Fourth	6 April 2026 to 5 April 2027	1 April 2026 to 31 March 2027	7 May 2027

The 2025/26 self-assessment return must still be submitted through the usual process by 31 January 2027. The first annual return completed through the MTD system, covering 2026/27, will be due by 31 January 2028.

Can Mistakes Be Corrected After an Update Is Sent?

Mistakes can normally be corrected in the digital records and reflected in the next cumulative quarterly update. Taxpayers do not generally need to reopen and resubmit every earlier update.

For example, if an invoice dated in May is entered incorrectly and corrected in September, the cumulative update sent in November should contain the corrected year-to-date figures.

This cumulative method is an important distinction. Some explanations describe each submission as a completely separate three-month return, but HMRC’s guidance confirms that each update runs from the beginning of the tax year or calendar reporting year to the end of the relevant period.

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What Happens If the Making Tax Digital First Quarter Deadline Is Missed?

HMRC will not apply quarterly-update penalty points for late submissions during the 2026/27 tax year. However, the updates remain legally required and must all be submitted before the annual MTD tax return can be completed.

The first-year concession does not protect taxpayers from:

• Penalties for a late annual tax return
• Late-payment penalties
• Interest on tax paid after the payment deadline
• Administrative problems caused by incomplete digital records

From the tax years after 2026/27, missing a quarterly deadline will normally result in one penalty point. The threshold is four points, at which stage a £200 penalty is charged. A further £200 penalty can apply for each later missed deadline while the taxpayer remains at the threshold.

Only one point can be issued for a particular deadline, even where a person has several businesses and submits several quarterly updates late. MTD for Income Tax penalty points are also separate from any penalty points arising under MTD for VAT.

What Should You Do Before Submitting the First Update?

Taxpayers should check their registration, software connection and digital records before pressing submit. The update should be generated from records created since the start of the applicable reporting period.

A practical review should include:

1. Confirm that you are within MTD. Recheck the gross self-employment and property income shown on the 2024/25 return.
2. Complete the MTD sign-up process. Being registered for self-assessment does not, by itself, complete MTD registration.
3. Authorise compatible software. HMRC provides a software finder for MTD for Income Tax.
4. Check every relevant income source. A separate update may be required for each trade and property business.
5. Update digital records. Record income and expenses from 6 April, or from 1 April when using calendar periods.
6. Review the cumulative totals. Look for duplicate bank transactions, omitted invoices, personal costs and incorrect category allocations.
7. Retain submission confirmation. Keep evidence showing when the update was accepted by HMRC.

Taxpayers can continue to use spreadsheets, provided suitable bridging software creates the required digital connection and submits the information to HMRC. A spreadsheet on its own cannot send an MTD update.

Further guidance is available in Apex Accountants’ article on the £50,000 MTD rule for sole traders and landlords.

Who Can Be Exempt From the First Quarterly Deadline?

Some individuals and entities are automatically exempt, while others must apply to HMRC. An exemption from MTD changes the reporting method but does not normally remove the requirement to report taxable income through self-assessment.

Automatic exemptions include certain trusts, personal representatives, non-resident companies filing an SA700 and individuals without a National Insurance number before the start of the relevant tax year. Partnerships are not currently required to use MTD for income tax, although the government intends to set out their timetable separately.

A person may apply for digital-exclusion exemption where it is not reasonable for them to use software because of factors such as:

• Age, disability or a health condition
• Religious beliefs incompatible with digital record-keeping
• Lack of internet access because of location, with no suitable alternative available

HMRC considers applications individually. Cost, limited experience with software or having only a small number of transactions is not normally enough on its own. A more detailed explanation is available in Apex Accountants’ guide to MTD exemptions.

FAQs About MTD Quarterly Update Deadline

Is Any Tax Payable on 7 August 2026?

No tax payment becomes due simply because the first quarterly update is submitted. The update provides income and expense totals that can generate an estimated tax position, but the normal annual tax-payment deadlines continue to apply.

Can an Accountant Submit the Quarterly Update?

Yes. An authorised accountant or tax agent can sign a client up, manage digital records and submit quarterly updates through compatible software. The taxpayer remains responsible for providing complete and accurate information to the agent.

Do I Need to Submit an Update When There Was No Income?

Yes. HMRC requires a quarterly update even where no income was received and no expenses were incurred during the latest period. The software should submit a nil or no-activity update for the relevant business.

Can I File the Update Through My Personal Tax Account?

No. Quarterly updates must be submitted through software that works with MTD for Income Tax. HMRC does not provide a form within the ordinary online Self Assessment service for manually entering the quarterly figures.

Do Quarterly Updates Replace the Annual Tax Return?

No. Four quarterly updates must be followed by an annual tax return submitted through compatible software. The annual return includes other income, reliefs, claims and final adjustments that may not have appeared in the quarterly summaries.

How Much Does Accountant Support for MTD Cost?

The cost depends on the number of businesses, transaction volume, quality of existing records, software requirements and whether bookkeeping is included. A straightforward sole trade with organised digital records will generally require less work than a taxpayer with several trades and rental properties.

How Can Apex Accountants Help With the First MTD Update?

Where records are incomplete, software has not been connected or several income sources must be reported, the sensible next step is to resolve the position before the figures build into the next cumulative period.

Apex Accountants can check eligibility, arrange software, review digital records and manage quarterly submissions through its Making Tax Digital accountant service. To discuss the 7 August deadline, book a consultation with the team.

Slow adoption despite clear government deadlines

HM Revenue & Customs (HMRC) achieved a major milestone on 6 April 2026, when the first phase of Making Tax Digital for Income Tax officially launched. From this date, landlords and sole traders with an annual income above £50,000 from self‑employment or property must digitally record their income and expenses and submit quarterly updates using compatible software. However, despite extensive consultation and a gradual timetable, the response has been slower than expected. A recent report revealed that three-quarters of the affected businesses missed the registration deadline, raising concerns about awareness and readiness ahead of the upcoming quarterly reporting deadlines.

Key takeaways:

• MTD for income tax goes live: From 6 April 2026, landlords and sole traders with an income exceeding £50,000 must comply with the digital tax rules.
• Phased introduction: Those earning between £30,000 and £50,000 will need to comply from April 2027, and those earning over £20,000 by April 2028.
• Slow uptake: Of the 864,000 individuals expected to register by 6 April, only 218,000 had done so by 14 April, leaving roughly three-quarters of those affected outside the system.
• Awareness gap: Josh Toovey from the Association of Independent Professionals and the Self-Employed highlighted a significant awareness gap, especially among those without accountants.
• Penalties and reporting deadlines: HMRC confirmed that late registrations will not incur fines, but once quarterly reporting begins in August 2026, businesses must be fully compliant, with no room for error.

Understanding Making Tax Digital for Income Tax Obligations

For those required to use MTD in April 2026, the regime involves a fundamental shift in how records are kept and tax liabilities are calculated, particularly for sole trader tax digitalisation. Taxpayers are required to use approved software to create and maintain digital records of their income and expenses, submit quarterly updates to HMRC, and file an end-of-period statement and final declaration by the following 31 January. HMRC’s guidance emphasises that digital records must be maintained on a continuous basis and that each income source (self-employment or property) may need to be reported separately.

Those who sign up now will enjoy a lenient approach to penalties: HMRC will not apply points for late quarterly updates during the first year (2026‑27), although penalties still apply for late tax returns or payment of tax owed. The department advises taxpayers to sign up early rather than risk missing the first quarterly deadline of 7 August 2026. Early signup also allows time to test software, resolve technical issues, and adapt recordkeeping processes. Agents can enrol clients via a separate process.

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Why the slow take‑up?

1. Lack of Awareness About MTD for Income Tax

Several factors contribute to the low registration rate for Making Tax Digital (MTD). First, awareness of MTD for income tax remains patchy outside the professional services community. The scheme has been delayed several times since its announcement in 2015, leading many sole traders and landlords to assume that MTD compliance for landlords would not be required for years. The re-framing of the start date to 2026 in the 2024 Autumn Statement drew limited attention because the thresholds apply to income earned in the 2024-25 tax year—a distinction that many fail to appreciate. Under the rules, HMRC assesses a taxpayer’s qualifying income after they submit their 2024-25 Self Assessment return; if it exceeds £50,000, they must be ready for MTD from 6 April 2026. This time lag can lull affected taxpayers into a false sense of security.

2. Limited Government Publicity Campaign

Second, the government has not undertaken a high-profile publicity campaign. Tax professionals report that many clients have not received the expected letters from HMRC telling them they need to sign up. The Making Tax Digital brand is often associated with VAT, and some self-employed individuals wrongly assume that because they already keep digital VAT records, they do not need to take further action.

3. Confusion About Software Choices

Third, there is confusion about software. HMRC lists dozens of compatible products, from basic spreadsheets with bridging software to full-scale accounting packages. Picking the right solution requires an understanding of one’s business operations, and many landlords and sole traders are reluctant to invest in new software until absolutely necessary. There is also scepticism about whether quarterly updates will lead to more frequent payment demands, even though HMRC insists that tax will still be payable by 31 January following the end of the tax year.

Business implications and risks

• Penalties for non-compliance:
  • HMRC will implement a points-based penalty regime starting from 2026–27 for late submissions.
  • Each late quarterly update will incur one point.
  • Once a threshold of four points is reached (for annual reporters), an automatic £200 fine will apply to subsequent late submissions until the points expire.
  • Late payment of tax will attract interest and surcharges, regardless of the soft-landing period for quarterly updates.
  • Failure to keep digital records could lead to inaccuracy penalties under existing legislation.
• Operational challenges for businesses:
  • Quarterly updates require businesses to maintain accurate, up-to-date records.
  • Sole trader tax digitalisation will require sole traders, who are accustomed to filing only one Self Assessment return per year, to adjust their processes for quarterly updates.
  • Landlords with multiple properties must:
    • Correctly allocate income and expenses.
    • Maintain digital receipts and ensure letting agent statements are fed into the software.
  • Businesses using spreadsheets will need bridging software to submit updates, adding complexity.
• Potential benefits of MTD for Income Tax:
  • Digital record-keeping offers a clearer view of cash flow, profits, and tax liabilities throughout the year, improving budgeting.
  • It reduces the risk of under-reporting and avoids surprise tax bills.
  • Early adoption of software can help businesses streamline invoicing, integrate banking data, and automate calculations, saving time.
  • Agents will have more timely data to provide clients with advice on tax planning and payment on account. 

How Apex Accountants & Tax Advisors Can Support Landlords with MTD Compliance

The low sign-up rate emphasises the necessity for tailored professional support. Apex Accountants & Tax Advisors guides landlords and sole traders through the transition to MTD compliance for landlords. Our services include:

• Eligibility assessment and sign‑up: Reviewing clients’ qualifying income to determine whether they fall within the £50,000 threshold and managing the HMRC sign‑up process.
• Software selection and setup: Helping clients choose compatible software or bridging tools that suit their operations and budget, and assisting with installation and migration.
• Digital record‑keeping support: Designing bespoke bookkeeping workflows, training staff on digital record‑keeping and ensuring that income and expenses are captured accurately in real time.
• Quarterly compliance and review: Preparing and submitting quarterly updates, reviewing data for accuracy and advising on tax planning opportunities arising from interim profits.
• Representation and troubleshooting: Liaising with HMRC on behalf of clients, resolving technical issues and providing guidance if penalty points accrue.

Our chartered tax advisers focus on minimising disruptions and ensuring compliance. With the first quarterly update deadline approaching in August 2026, now is the ideal time to seek expert help. Contact Apex Accountants today to arrange a confidential consultation and prepare your business for the digital tax regime.

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Frequently asked questions

What is Making Tax Digital for Income Tax?

Making Tax Digital for income tax is a requirement for sole traders and landlords to keep digital records and send quarterly updates of business and property income to the HMRC using compatible software. The regime applies to those with an annual income above £50,000 from self‑employment or property from 6 April 2026.

Who needs to sign up and when?

If your qualifying income from self-employment and property is above £50,000 in the 2024–25 tax year, you must sign up for MTD and start digital record-keeping on April 6, 2026. Those earning £30,000–£50,000 must join from 6 April 2027, and those earning above £20,000 must join from 6 April 2028. HMRC will write to you, but you remain responsible for checking and registering.

What counts as qualifying income?

Qualifying income is the combined gross income from all your sole‑trader businesses and property rental (before expenses). It excludes employment income and most pensions. HMRC reviews your Self Assessment return to calculate qualifying income each year.

Will penalties apply if I miss quarterly updates?

HMRC will not issue penalty points for late quarterly updates in the first year (2026‑27). From 2027 to ’28, each late submission will attract a point, and accumulating four points will trigger a £200 fine. Penalties for late tax returns and late payment still apply during the soft‑landing period.

Do I still need to file a Self Assessment return?

Yes. Even under MTD, you must submit a final declaration—similar to a self-assessment return—by the 31st of January, following the end of the tax year. The quarterly updates do not replace the annual tax return; they provide HMRC with periodic data to reduce errors and improve compliance.

Which software should I use?

HMRC does not endorse specific products but publishes a list of compatible software. Choices range from simple spreadsheet solutions with bridging software to full accounting packages. The best option depends on the complexity of your business. Consider factors such as the number of income sources, the need for invoice functions, bank feed integration, and ease of use. Apex Accountants can assist in selecting and setting up a solution tailored to your needs.

From 6 April 2026, self-employed childminders with qualifying income over £50,000 must use Making Tax Digital for Income Tax. The threshold drops to £30,000 for the 2025 to 2026 tax year and £20,000 for the 2026 to 2027 tax year. For a sector built around home‑based care and shared household resources, MTD means a shift from flat‑rate allowances to meticulous digital records. Understanding the new rules now will reduce disruption later.

Wear and tear: 10% allowance disappears

Currently, most childminders deduct a flat 10% of their income for wear and tear on household furnishings. Under MTD, childminders must follow the normal business-expense rules and keep digital records. Once within MTD, childminders should claim actual allowable business costs, including a business proportion where an item is used partly for personal use, which directly affects expense claims for childminders under MTD UK. If a carpet costs £600 and is used 60% for childminding, you can only deduct £360. Childminders not within MTD may continue using the childminder-specific alternative methods, including the 10% wear-and-tear approach where applicable.

Household costs: apportioning bills

Household expenses fall into two categories:

• Running costs: gas, electricity and water
• Fixed costs: Council Tax, rent or mortgage interest

Under MTD, childminders follow normal business rules and apportion mixed-use costs on a reasonable basis. They keep a clear record of how that percentage was reached as part of accurate expense claims for childminders under MTD UK. HMRC accepts reasonable methods such as the following:

• The number of rooms used for childminding
• The time spent caring for children

For example, if half of your home is used for childminding for eight hours a day, it is reasonable to claim a corresponding share of running costs for that period.

If you do not use MTD and care for children in your home for 40 hours or more a week, HMRC allows the following:

• 33% of running costs
• 10% of fixed costs

Lower hours require proportionate adjustments.

MTD replaces these flat rates with tailored calculations. This improves accuracy but increases the need for consistent records and clear justification.

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Food and drink: from estimates to actuals

Childminders provide meals and snacks as part of their service. Under MTD, you must claim the actual amount spent on food and drinks for children and apportion costs when shared with your family. Before joining MTD, you may continue using estimated costs, and receipts are not required for food.

Digital records and quarterly reporting for MTD expenses for childminders in the UK

The main changes under MTD are digital recordkeeping and quarterly updates through compatible software. In 2026, you must use HMRC-compatible software to record each income and expense transaction and send quarterly updates. The threshold falls in 2027 and 2028. If you are not using MTD, you need receipts for business expenses of £10 or more, or small items bought together totalling £10 or more. Those below the threshold can stay on the current system and rely on cashbooks and attendance registers, but careful recordkeeping remains essential.

Why it matters

HMRC estimates that errors and mistakes in self‑assessment account for 18.5% of the tax gap. MTD aims to reduce this by requiring digital records and regular updates. For childminders, non-compliance could result in penalties, interest, and the loss of legitimate tax deductions for childminders MTD UK. Yet the changes also create opportunities: real-time records can improve your understanding of costs, help you set fees and save time during annual returns.

Practical steps to prepare

• Assess your income and register early: decide whether your total trading and property income exceeds the relevant threshold for 2024–25 or 2025–26 and sign up for MTD.
• Select appropriate software: choose a package approved by HMRC that fits your business size and allows easy allocation of business proportions.
• Document expenses as they occur: record the date, amount and description for each purchase. For items shared with your family, note the percentage used for childminding.
• Keep usage logs: maintain records of hours worked and rooms used to support your calculations.

How Apex Accountants can assist

Transitioning to digital reporting while caring for children is challenging. Apex Accountants & Tax Advisors helps childminders by:

• Reviewing income and advising when you must join MTD;
• Setting up and training you on compliant software;
• Designing record‑keeping procedures tailored to your home‑based business;
• Preparing quarterly updates and year‑end submissions;
• Advising on business percentages and maximising tax deductions for childminders: MTD UK.

Contact Apex Accountants today for personalised guidance and peace of mind.

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Call Anytime 0203 883 4777

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FAQs

When does Making Tax Digital apply to me? 

If your income from self-employment and property exceeds £50,000 in 2024–25, you must adopt MTD from April 2026; those above £30,000 will join in 2027. A further reduction to £20,000 is expected in 2028.

Can I still claim the 10% wear‑and‑tear allowance? 

Yes, but only while you remain outside MTD. Once you are mandated to use digital reporting, you must claim the business portion of the actual cost of household items.

How do I work out household expenses? 

Under MTD, calculate a business percentage based on rooms used or hours spent caring for children. The current regime allows flat‑rate percentages of 33% and 10% for running and fixed costs.

Do I need receipts for food and drink? 

No. HMRC guidance says receipts are unnecessary for food and drink provided to children. Receipts are required for expenses over £10 or grouped purchases over £10.