HMRC has issued a warning to 864,000 sole traders and landlords that the first Making Tax Digital quarterly deadline is less than a fortnight away on August 7. The quarterly submission will detail income and expenditure for the opening three months of the tax year, though it does not constitute a tax return and will not supersede the Self Assessment procedure.
HMRC Director's Statement
Craig Ogilvie, HMRC's Director of Making Tax Digital, said: "This is a landmark moment for the tax system. Hundreds of thousands of sole traders and landlords are now keeping digital records and will be sending their first quarterly update in the coming weeks."
"For those already using software, this should be straightforward and take minutes. If you haven't signed up yet, there is still time - visit GOV.UK and search 'Making Tax Digital for Income Tax' to get started."
Who Must Comply
At present, sole traders and landlords with earnings exceeding £50,000 from their self-employment and property ventures must comply with this deadline. The MTD expansion will encompass those earning above £30,000 from April 2027, and those earning over £20,000 from April 2028.
HMRC guidance states: "HMRC will assess your qualifying income for a tax year by checking the Self Assessment tax return that you submitted in the previous tax year. You should also check your qualifying income yourself."
Penalties and Soft Landing
For the 2026/2027 tax year, penalties for missing the quarterly deadlines will not be applied, HMRC has confirmed. This measure provides a 'soft landing' for taxpayers adapting to the new framework.
From the second year of MTD, missing a quarterly deadline will result in a penalty point being issued. After accumulating four points, taxpayers will face a £200 fixed penalty.
Digital Requirements and Support
The new MTD system requires affected taxpayers to maintain digital records and submit regular quarterly updates through HMRC-compatible software. The scheme is being phased in progressively based on earnings from particular income types.
Some compatible software will feature HMRC Assist, a digital support tool offering feedback to help identify mistakes before submission. However, HMRC has cautioned: "Customers remain responsible for ensuring their return is accurate."
Quarterly Updates and Self Assessment
Following each quarterly update submission, taxpayers will receive an estimate of their tax liability to assist with financial planning. They will still be required to submit their Self Assessment tax return and settle this bill by January 31, 2027.
Expert Caution
Several experts have cautioned that while the new legal requirement for quarterly updates may function smoothly in the initial months, the real challenge might only emerge next year. Matthew Knight, Chief Freelance Officer at Freelancing.Support, told Newspage: "The anxiety around getting things set up, registered, doing the admin and submitting things might be larger than the task itself."
"However, this first round of people in MTD, who don't have penalties applied, and are more likely to have accounting support are not the true litmus test."
"When the threshold drops to £30k next year, it will affect many who have been pushed into self-employment, and may not be able to easily afford software, accounting advice or the time to do more frequent admin. HMRC will need to be on hand to support those who need the most support."
