Making Tax Digital
Making Tax Digital Is Live: What Sole Traders & Landlords Need To Do
Making Tax Digital
HMRC’s MUCH VAUNTED Making Tax Digital (MTD) for Income Tax went live on 6 April 2026, and the first quarterly deadline has already been and gone. This represents a major shift in income tax reporting in the UK and is not without controversy. If you’re a sole trader or landlord with income over £50,000, the new HMRC digital reporting rules will apply to you. What many have been putting off is now the system you are actually working under – not a future date on the calendar.
In today’s Shipleys Tax brief we look at the general impact of these changes and what needs to be done to avoid falling foul of the new system despite promises of a soft touch by HMRC.
What’s actually changing
From 6 April 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send quarterly updates to HMRC using MTD compatible software. Qualifying income is gross turnover from self-employment and property combined, before expenses, based on the tax return already submitted for 2024-25. The familiar annual Self Assessment return is being phased out for this group, replaced by four quarterly updates plus a Final Declaration.
From 6 April 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send quarterly updates to HMRC using MTD-compatible software.
The first deadline has already passed
The four quarterly deadlines for 2026/27 fall on 7 August 2026 (covering 6 April to 5 July), 7 November 2026, 7 February 2027 and 7 May 2027, with a Final Declaration due by 31 January 2028 replacing the old tax return deadline. That first deadline, 7 August, was six days ago. Anyone required to be in the regime who hasn’t yet submitted a Q1 update needs to check their position now, rather than waiting for the next one to catch up.
HMRC will start signing people up from September
HMRC confirmed on 12 August 2026 that more than 436,000 sole traders and landlords have now successfully sent their first MTD quarterly update, with over 570,000 customers signed up to the service overall. From September 2026, HMRC will begin signing up customers who should be using MTD for Income Tax for 2026/27 but haven’t done so themselves, working through them in stages over the following months. Anyone who signs up voluntarily now avoids being contacted this way and keeps control over the timing and software choice.
From September 2026, HMRC will begin signing up customers who should be using MTD for Income Tax for 2026/27 but haven’t done so themselves.
The Association of Taxation Technicians has previously flagged that around 850,000 landlords and sole traders were expected to come into MTD from April 2026, and that roughly a quarter of those affected don’t have an agent to help them through it. As Jon Stride, chair of the ATT’s Technical Steering Group, put it when the first-year penalty easement was announced: “those trying their best to comply but struggling shouldn’t be penalised” – but that goodwill doesn’t extend to simply not signing up at all.
The new penalty regime
Alongside MTD, HMRC is introducing a points based penalty system, moving away from the immediate fixed penalty approach used under standard Self Assessment. Quarterly filers accumulate a penalty point for each late submission; once four points are reached, a £200 penalty applies, followed by another £200 for each further late submission until compliance improves. Points expire automatically after 24 months if the threshold isn’t hit again. Late payment penalties are also tightening: 3% of tax overdue at 15 days, another 3% at 30 days, and 10% a year accruing daily on anything still outstanding after 31 days.
Once four points are reached, a £200 penalty applies, followed by another £200 for each further late submission until compliance improves.
Why this catches people out
The “soft landing” HMRC has publicised for 2026/27 – no penalty points for late quarterly updates in the first year – has led some taxpayers to assume nothing is enforced yet. That’s not quite right: the soft landing only covers points for late quarterly updates. Penalties for a late tax return or late payment of tax still apply in full from day one. There’s also confusion over qualifying income itself – it’s gross turnover before expenses, and it’s based on last year’s return, not current-year figures. Anyone running both a trade and a rental property should check the combined figure rather than assuming each income source is judged separately.
The soft landing only covers points for late quarterly updates. Penalties for a late tax return or late payment of tax still apply in full from day one.
What to check now
The threshold isn’t static either – it drops to £30,000 from April 2027 (based on 2025-26 income) and to £20,000 from April 2028 (based on 2026-27 income), pulling in a much wider group of sole traders and landlords over the next two tax years. Worth checking now, even if this year’s income sits comfortably under £50,000: confirm your qualifying income against last year’s return, get MTD-compatible software in place well before you’re required to use it, and if the 7 August update has been missed, get it submitted rather than letting a second deadline pass.
The shift to quarterly digital reporting is a genuine change in how HMRC expects records to be kept, not just a filing-date reshuffle. Getting the software and habits right now, while the penalty regime is still in its soft-landing year, is considerably easier than catching up once points start accumulating.
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This article is for general information only and does not constitute professional advice. Please seek qualified tax advice before taking any action.
