HMRC has issued an urgent alert to sole traders and landlords as the 2026 deadline for its Making Tax Digital (MTD) system is just weeks away. The tax authority is working to dispel myths surrounding the scheme after evidence emerged that vast numbers of those impacted have not yet registered, with the first quarterly submission required by August 7, 2026.
Who Is Affected and What Must Be Done
The reform impacts sole traders and landlords with combined turnover exceeding £50,000 annually. HMRC estimates that 864,000 people are in this initial phase, all obliged to submit their first quarterly update via HMRC-approved software by August 7. In a social media post, HMRC stressed that every three months, affected individuals must use compatible software to submit digital records of income and expenditure, including for each income source such as self-employment and property income.
Early indicators suggest many are unprepared. Statistics reveal that just one week after the system launched, only 250,000 people had registered, and nearly 170,000 of those enrolled through tax agents or accountancy firms rather than directly themselves. Campaigners fear the actual number lagging behind could reach hundreds of thousands.
Background and Key Dates
Making Tax Digital was first consulted on in 2016 as part of HMRC's push to modernise taxpayer data management. While aspects like MTD for VAT have been operational for years, the income tax component faced repeated delays due to complexity. Under the regulations now in force, taxpayers must abandon pen-and-paper record keeping and submit quarterly summaries to HMRC four times yearly instead of a single annual return.
The critical dates are: August 7, 2026 (first quarterly update), November 7, 2026 (second), January 31, 2027 (last 'old style' Self Assessment return for 2025/26), February 7, 2027 (third quarterly update), May 27, 2027 (fourth), and January 31, 2028 (first year-end declaration via MTD software for 2026/27). A second wave with lower turnover thresholds will follow in subsequent years.
Penalties and Grace Period
Chancellor Rachel Reeves last year announced no sanctions for late quarterly updates during the 2026/27 tax year, a gesture critics interpreted as acknowledging disorganised implementation. However, from next year, a points-based penalty system akin to driving licence endorsements will apply, with fixed fines for accumulating too many points. Accountants warn that mistakes in the first submission can cascade through every subsequent filing, as each quarterly update builds cumulatively on the previous one.
HMRC's message is straightforward: get registered, sort out compatible software, and don't let August 7 catch you out. According to HMRC, once a quarterly update is filed, users can view an estimated tax bill for their self-employment and property income in their software or HMRC online account.
