Making Tax Digital (MTD) for Income Tax is no longer a future proposal, it is law. If you are a landlord or sole trader with qualifying income, your first quarterly update to HMRC is due by 7 August 2026. This submission covers your income and expenses from 6 April to 5 July 2026, and getting it right sets the tone for the rest of the tax year.
Why the 7 August 2026 Deadline Matters
This date marks the first time landlords and sole traders must submit quarterly income and expense summaries to HMRC under the MTD for Income Tax framework. Previously, these taxpayers only dealt with a single annual Self Assessment return. Now, HMRC expects four quarterly updates, an End of Period Statement (EOPS), and a Final Declaration each year.
Getting your first quarter right is critical. Accurate bookkeeping from the outset reduces errors in subsequent quarters. Taxpayers who set up their systems and records properly in Q1 consistently report fewer correction headaches throughout the year, while those who delay often spend more time fixing mistakes than they would have spent getting organised from the start.
Who Must Submit the First Quarterly Update?
MTD for Income Tax does not only affect large businesses. Many individual landlords and self-employed
professionals are within scope. In this first phase, the rules apply to anyone whose combined gross
income from self-employment and property exceeds £50,000. The key word is gross, HMRC assesses
your income before any allowable expenses are deducted, based on whichever tax year HMRC has used
to calculate your eligibility.
A second phase will bring taxpayers with gross income between £30,000 and £50,000 into the system from April 2027. If you fall into that bracket, now is the ideal time to start preparing.
Practical Example
James is a self-employed electrician earning £38,000 a year in business income. He also receives £18,000 from rental property. Although James claims several thousand pounds in allowable expenses, tools, insurance and repairs. HMRC looks at his combined gross income: £56,000. Because this exceeds the £50,000 threshold, James must comply with MTD for Income Tax and submit his first quarterly update by 7 August 2026.
Contrast this with Sarah, a freelance copywriter earning £32,000 with no property income. Sarah falls
below the £50,000 threshold and is not required to comply in this first phase, though she will likely be
included from April 2027.
Quarterly Updates Are Not Tax Returns
A common misconception is that quarterly updates work like annual tax returns. They do not. A quarterly update simply provides HMRC with a summary of your income and expenses for that three month period. Final tax calculations such as capital allowances, loss relief, overlap relief, and accounting adjustments are handled later through the End of Period Statement and Final Declaration. Importantly, quarterly updates do not require you to pay tax four times a year. These are reporting obligations only. Your income tax payment schedule remains separate and unchanged.
What sole traders typically report each quarter:
- Total sales and invoiced income
- Business expenses such as travel, office costs, and subscriptions
- Vehicle and fuel costs
- Professional fees and insurance
- Equipment purchases
What landlords typically report each quarter (income)
- Rental income received
- Utility costs recovered from tenants
What landlords typically report each quarter (allowable expenses)
- Property repairs and maintenance costs
- Landlord insurance premiums
- Letting agent and management fees
- Safety certificates, service charges, and cleaning costs
What Records Should You Keep During Q1?
MTD requires all transactions to be recorded digitally, as close to the transaction date as possible. Leaving receipt entry for weeks creates gaps that lead to missed, duplicated, or miscategorised records.
Sole traders should maintain digital records of customer invoices, bank transfers, travel expenses, office costs, subscriptions, advertising spend, telephone and internet bills, and professional fees. Landlords need to track rent received, repair invoices, insurance policies, agent fees, safety compliance costs, and any other property-related expenditure.
Choosing HMRC-Compatible Software
Selecting accounting software is about more than ticking a compliance box. The right platform should
reduce manual work, give you clear financial visibility, and make quarterly reporting straightforward.
Below is a comparison of the features worth evaluating.
Below is a comparison of the features you should evaluate before making a decision.
| Feature | Why It Matters |
| HMRC MTD compatibility | Required for submitting quarterly updates. |
| Automatic bank feeds | Imports transactions directly from your bank, reducing manual entry. |
| Receipt scanning | Converts paper receipts into digital records using a mobile app. |
| Property income tracking | Useful for landlords managing one or multiple rental properties. |
| Expense categorisation | Automatically groups transactions into the correct expense categories. |
| Cloud access | Allows you to work from any device with an internet connection. |
| Accountant access | Enables your accountant to review and correct records without exchanging files. |
| Real-time financial reports | Helps monitor income, expenses, and profitability throughout the year. |
Popular HMRC-recognised options include Xero, QuickBooks, FreeAgent, and Sage. HMRC maintains a
full list of compatible software on GOV.UK. Choose based on the complexity of your business rather
than price alone, a cheaper tool that creates extra admin work rarely saves money in the long run.
Tip for landlords: If you manage multiple properties, prioritise software with dedicated property
income tracking and per-property reporting. This makes quarterly submissions significantly easier.
How our Advisors Simplify MTD Compliance
Our advisors simplify MTD compliance a practical choice for many landlords and sole traders.
The key advantages include:
- Continuous bookkeeping support rather than an annual review, catching errors before they
compound - Faster quarterly reporting, many businesses spend less than an hour reviewing figures before
submission - Proactive tax planning, including liability forecasting, cash flow management, and identifying
reliefs - Reduced admin burden, freeing you to focus on running your business or managing your
properties
This approach is especially valuable for landlords with properties in different locations or sole traders
who travel frequently and cannot easily visit a traditional accountant’s office.
What Happens If You Miss the 7 August Deadline?
HMRC operates a points-based penalty system for late submissions, but there is an important concession for the first year. For the 2026/27 tax year only, HMRC will not issue penalty points for late quarterly updates, this soft landing gives taxpayers time to adjust to digital reporting. You must still submit all four quarterly updates, since HMRC will not accept your Final Declaration until they are all in, but a late Q1 submission this year will not, on its own, trigger a penalty point.
This concession does not extend to the Final Declaration for 2026/27, which remains due by 31 January 2028 and is subject to normal penalty points if filed late. From the 2027/28 tax year onward, the full points-based regime applies to quarterly updates as well: each missed deadline adds one point, and once four points accumulate, a £200 financial penalty is triggered. Points expire after a period of consistent, on-time compliance.
Beyond the points system, late submissions can increase the risk of compliance checks and create extra administrative work correcting records. Treating 7 August as a hard deadline, regardless of the current soft landing, is the safest habit to build now, since the concession will not be repeated in future years. Making Tax Digital does not have to be a burden for landlords and sole traders, but it does reward preparation. Businesses that keep accurate digital records, review their figures quarterly, and submit on time tend to sail through the rest of the MTD cycle with far fewer surprises. If you are unsure whether you are in scope, which software fits your business, or how to get your first submission right, speak to a tax advisor before the deadline. Book a free MTD readiness review with our team to make sure your first quarterly update, and everyone after it, goes smoothly.
Frequently Asked Questions
Will quarterly updates replace my Self-Assessment tax return?
No. Quarterly updates provide HMRC with a rolling summary of your income and expenses throughout the year. You will still need to submit an End of Period Statement (EOPS) and a Final Declaration after the tax year ends to finalise your tax position, claim allowances, and confirm your liability. Think of quarterly updates like the building blocks and the Final Declaration as the completed picture.
Do I need to pay tax four times a year under MTD?
No. Quarterly updates are reporting obligations only; they do not trigger a tax payment. Your income tax payment dates remain unchanged and are managed through the existing Self-Assessment payment schedule, including payments on account where applicable.
Can I correct a quarterly update after submission?
Yes. If you discover an error after submitting a quarterly update, you can correct it through a subsequent submission or through year-end adjustments in your End of Period Statement. It is good practice to review each quarter carefully before submission, but the system does allow for corrections.
What if I miss the 7 August deadline?
HMRC has confirmed a soft landing for the first year, so a late Q1 submission in 2026/27 will not trigger a penalty point. You still need to submit it, though, all four quarterly updates are required before HMRC accepts your Final Declaration, and normal late-filing penalties apply to that final step. Treat 7 August as a hard deadline regardless, since this concession will not apply from 2027/28 onward.
What if my income drops below £50,000 during the year?
HMRC determines your obligation based on the tax year used for eligibility assessment, not your in-year performance. If your income was above £50,000 in the qualifying year, you remain within scope for the current MTD cycle. Contact HMRC or speak with a tax advisor if your circumstances change significantly.
