Making Tax Digital is Here

Is Your Business Ready for the First Quarterly Deadline?

Making Tax Digital (MTD) for Income Tax officially arrived in April, and now the first major deadline is almost here.

If you’re a self-employed individual or landlord who falls within the new rules, your first quarterly update is due by 7 August 2026.

The good news? HMRC has confirmed there won’t be penalties for late quarterly updates during the first year of MTD. Penalties won’t begin until 6 April 2027, giving taxpayers a little breathing space while everyone gets used to the new system.

That said, it’s still worth getting prepared now. The earlier you understand what’s required, the easier future submissions will be.

Still wondering if Making Tax Digital applies to you?

You’re certainly not alone.

Since MTD launched, many people are not sure whether they need to comply, what information has to be submitted or whether they will still need to complete a Self-Assessment tax return.

The rules can seem confusing at first, but they’re much more straightforward once you know what’s expected.

Who needs to comply?

At the moment, Making Tax Digital for Income Tax applies to individuals whose gross income from self-employment, property income, or both combined exceeds £50,000, based on their 2024/25 Self-Assessment tax return.

It’s important to remember that this threshold is based on gross income before expenses, not your profit.

The rules will gradually expand over the next few years:

• From April 2027 – individuals with income over £30,000
• From April 2028 – individuals with income over £20,000

Here are a few examples:

• A sole trader with turnover of £55,000 is likely to fall within MTD.
• A landlord receiving £52,000 in rental income may also need to comply.
• Someone with £30,000 of rental income and £25,000 of self-employment income could also be affected because the income is combined.

If you’re not sure whether the rules apply to you, it’s worth checking now rather than waiting until the deadline.

HMRC has a “Work Out Your Qualifying Income for Making Tax Digital for Income Tax” tool as well as a Making Tax Digital Tool.  These online eligibility checkers can help you confirm whether you’re within the new regime.

What actually has to be submitted?

One of the biggest misconceptions is:

“Do I have to complete a mini tax return every three months?”

Thankfully, the answer is no.

Quarterly updates are simply a summary of your business income and expenses, submitted digitally using HMRC-compatible software.

You don’t need to calculate how much tax you owe or make year-end accounting adjustments every quarter.

Once you’ve submitted your fourth quarterly update, you will still complete the end-of-year Self-Assessment tax return to finalise your tax position, claim any reliefs and declare any other taxable income.

Common misconceptions about Making Tax Digital

As the first deadline gets closer, the same questions are being asked again and again.

“It’s based on my profit.”

No. The £50,000 threshold is based on gross income before expenses.

“I don’t need to worry until January.”

Your first quarterly update is due by 7 August 2026, well before the usual Self-Assessment deadline.

“I can still keep paper records.”

Unfortunately, not. MTD requires you to keep digital records and submit your updates using compatible software.

“Quarterly updates replace my tax return.”

Not yet. You’ll still need to complete the end-of-year Self-Assessment tax return to finalise your tax affairs.

What records should you keep?

Good record keeping has always been important, but under Making Tax Digital it’s now essential.

You’ll need to keep digital records of things like:

• Sales or rental income.
• Business expenses.
• Invoices and receipts.
• Dates and values of transactions.
• Relevant bank transactions.

Keeping everything up to date throughout the year makes each quarterly submission much quicker and far less stressful.

Many people see Making Tax Digital as just another compliance exercise.

In reality, it can also be an opportunity.

Keeping digital records throughout the year often gives you a clearer picture of how your business is performing and allows tax issues to be spotted much earlier, rather than just before the January deadline.

Don’t leave it until the last minute

Although there are no penalties for late quarterly updates during the first year, that doesn’t mean it’s a good idea to leave everything until the last minute.

Making Tax Digital is here to stay, and quarterly reporting will become a regular part of your annual tax obligations.

Getting your systems in place now will make future submissions much easier and help avoid unnecessary stress.

Frequently Asked Questions

Do I still need to complete a Self-Assessment tax return?

Yes. Quarterly updates don’t replace the year-end process. You’ll still need to complete your end-of-year tax return to finalise your tax position.

Is the £50,000 threshold based on profit?

No. It’s based on your gross income from self-employment and property before expenses are deducted.

Do I need special software?

Yes. Quarterly updates must be submitted using HMRC-compatible software. HMRC provides guidance on approved software.

What happens if I miss the first deadline?

HMRC has confirmed it won’t issue late submission penalty points for quarterly updates during the 2026/27 tax year for those who are newly required to comply with MTD. However, you’ll still need to submit all required quarterly updates before completing your year-end Self-Assessment tax return, so it’s still important to stay on track.