Thousands of self-employed workers and landlords earning more than £50,000 have until August 7 to meet the first reporting deadline under HM Revenue and Customs' (HMRC) new Making Tax Digital for Income Tax scheme.
The quarterly reporting deadline applies to sole traders and landlords with qualifying gross income above £50,000 who joined the first phase of the new digital tax system from April 6 this year.
Rather than keeping records throughout the year before submitting a single annual Self Assessment tax return, affected taxpayers are now required to keep digital records and submit quarterly updates using HMRC-compatible software.
Soft Landing Period for Penalties
Although HMRC has confirmed it will not issue penalty points for late quarterly submissions during the 2026-27 tax year as part of a transitional "soft landing", taxpayers are still expected to comply with the new reporting requirements.
The August 7 deadline marks the first major milestone under the new system, which will eventually replace the traditional annual reporting routine for hundreds of thousands of higher-earning sole traders and landlords.
Thomas Drury, money-saving expert at The Investors Centre, said many people may not yet realise how much their tax reporting obligations have changed. He said: "A lot of people still think January is the only tax deadline they need to worry about. In reality, for those brought into Making Tax Digital this April, August 7 represents the first major milestone under an entirely new reporting system."
Compliance Not Optional Despite Soft Approach
Mr Drury said businesses should not mistake HMRC's softer approach to penalties during the first year as a reason to ignore the new rules. He said: "Even though HMRC is taking a softer approach to late quarterly submissions during the first year, businesses shouldn't mistake that for a free pass. This is the time to get systems, software and record-keeping processes in place before the regime becomes fully enforced."
Making Tax Digital for Income Tax currently applies to sole traders and landlords with qualifying gross income over £50,000. The rollout is due to expand in future years to include people with lower qualifying incomes.
Shift to Continuous Digital Record Keeping
Mr Drury said one of the biggest misconceptions is that the changes are simply about completing tax returns online. He said: "This isn't just moving paperwork from paper to a computer screen. It's a shift towards continuous digital record keeping. Businesses that leave everything until January may find their existing systems simply aren't suitable anymore."
Taxpayers affected by the new rules must keep digital records using HMRC-compatible software. While paper records or spreadsheets can still be used to help organise accounts, they must be linked to compatible software capable of sending information to HMRC.
Mr Drury also urged businesses to check whether their bookkeeping software is compatible with Making Tax Digital and to confirm whether their income places them within the first phase of the rollout. He said preparing now would make future quarterly reporting much easier and help businesses adapt to the new system before it becomes fully established.
