Update, 30 July 2026: eight days to the first deadline, and HMRC has published its own count. The first quarterly update must reach HMRC by 7 August 2026. In a release on 23 July 2026 HMRC said more than 864,000 sole traders and landlords are within scope, and described the update as something that “takes minutes to complete” and “is not a tax return”. The first period runs from 6 April to 5 July 2026 for most people; those using calendar periods cover 1 April to 30 June. The deadline of 7 August is the same for everyone.
The penalty position is now confirmed by HMRC rather than inferred. No penalty points are issued for late quarterly updates in this first year. That concession covers the quarterly updates only: penalties still apply for late Self Assessment returns and late payments, and the tax return deadline is still 31 January. After 7 August, the remaining deadlines for this tax year are 7 November, 7 February and 7 May. Note that the periods are cumulative rather than discrete, so the second update covers 6 April to 5 October, not just the second quarter.
What has not changed: the thresholds still step down, to qualifying income above £30,000 from April 2027 and above £20,000 from April 2028, so a much larger group is pulled in over the next two years.
Making Tax Digital for Income Tax (MTD ITSA) is now in force. From 6 April 2026, sole traders and landlords with qualifying income above £50,000 are legally required to keep digital records and submit quarterly updates to HMRC, rather than filing one annual Self Assessment tax return. The first quarterly digital filing deadline lands on 7 August 2026.
If you are caught by the rules, you need to act. HMRC put more than 864,000 sole traders and landlords in scope when it issued its two-week deadline warning on 23 July 2026. Here is what the rules are, who is in scope, what the soft-landing year actually changes, and the practical steps to get sorted.
The short version
- From 6 April 2026, MTD for Income Tax is mandatory for sole traders and landlords with qualifying income above £50,000.
- More than 864,000 sole traders and landlords are in scope, on HMRC’s figure of 23 July 2026. An earlier HMRC snapshot put sign-ups at 219,000, or 28 per cent, as at 10 April 2026; HMRC has not published an updated sign-up count since, so treat that as a starting-line figure rather than the current position.
- The threshold drops to £30,000 in April 2027 and £20,000 in April 2028. By 2028, MTD ITSA will catch a much larger population.
- First quarterly digital filing deadline: 7 August 2026, then 7 November, 7 February, 7 May (final).
- 2026/27 is a “soft-landing” year for late submissions. The standard penalty of £200 for each block of four missed quarterly submissions starts to apply from the 2027/28 tax year.
- Annual Self Assessment is being replaced for in-scope filers, not added to. The full 31 January deadline still applies for the final declaration of the tax year.
- You need MTD-compliant software. HMRC publishes a list of compatible products. Some are free for the smallest filers; most cost between £5 and £30 per month.
Who is in scope from 6 April 2026
MTD ITSA applies if all of the following are true:
- You are an individual taxpayer (a sole trader or landlord, not a limited company).
- Your total qualifying income from self-employment and / or property is above the threshold.
- The threshold for the 2026/27 tax year is £50,000.
The 2026/27 threshold test uses your 2024/25 tax return (the most recent finalised return). If your qualifying income for that year was above £50,000, you are mandated for MTD from 6 April 2026.
What counts as qualifying income
HMRC defines qualifying income for MTD ITSA as:
- Gross trading income from self-employment (sole trader). This is your gross turnover, not your profit after expenses.
- Gross property income (rent received before expenses). This includes both UK and overseas property income.
Important to note that the threshold is based on gross income, not profit. So a sole trader with £60,000 of turnover and £15,000 of profit (after expenses) is in scope, even though the taxable profit is below £50,000.
What does not count
Income that does not count toward the MTD threshold:
- Employment (PAYE) income.
- Pension income.
- Savings interest.
- Dividends (if you are not also self-employed).
- Capital gains.
- Partnership income (partnerships have their own MTD timeline, not 2026).
- Limited company income (companies do not have MTD ITSA at all; they have Corporation Tax obligations separately).
A common confusion: if you are a sole trader earning £35,000 from your business and £40,000 from PAYE employment, your qualifying income for MTD purposes is £35,000 (the self-employment alone), so you are below the threshold. The PAYE income does not count.
What about joint property income?
If you and a partner jointly own a property, each of you considers your share of the gross rent separately. So a property generating £80,000 of rent owned 50/50 means £40,000 of qualifying income for each of you, putting both of you below the threshold (in 2026/27, though above the £30,000 threshold that applies from April 2027).
What MTD ITSA actually requires
Digital records
You must keep your business and property records digitally, using HMRC-compatible software. Spreadsheets can count as digital records, but they must be linked to compatible software via “bridging” software for submissions. Pure paper records are not compliant.
Quarterly updates
You submit four quarterly updates per tax year, each within one month of the period end. Note the shape of these periods, because it catches people out: each update runs from the start of the tax year to the end of the period, not just the preceding three months. HMRC’s guidance is explicit that an update covers “from the start of the tax year to the end of the update period, not just the previous three months”. The practical upside is that a mistake in one update can be corrected in the next without resending anything. The standard periods (and 2026/27 deadlines) are:
- Update 1: 6 April to 5 July 2026. Deadline: 7 August 2026.
- Update 2: 6 April to 5 October 2026. Deadline: 7 November 2026.
- Update 3: 6 April 2026 to 5 January 2027. Deadline: 7 February 2027.
- Update 4: 6 April 2026 to 5 April 2027. Deadline: 7 May 2027.
You can elect to use calendar update periods instead, running 1 April to 30 June, 1 April to 30 September, 1 April to 31 December and 1 April to 31 March, if that suits your bookkeeping. The deadlines do not shift: they are 7 August, 7 November, 7 February and 7 May either way. As HMRC puts it, the dates your update period covers depend on which basis you use, “but the deadline to send your update is the same”.
Each quarterly update is a summary of your business and property income and expenses for the quarter. It is not a tax return; you are not declaring tax due. You are simply telling HMRC what your income and expenses look like so far.
The final declaration
After the four quarterly updates, you submit a “final declaration” by 31 January following the end of the tax year. This is essentially the equivalent of your old Self Assessment return. It is where you:
- Confirm the final figures for the year, including any adjustments to your quarterly submissions.
- Declare other taxable income (savings, dividends, pension, employment, capital gains).
- Claim allowances and reliefs.
- Receive your final tax calculation.
For 2026/27, the final declaration deadline is 31 January 2028 (with the tax payment due on the same date, as is currently the case for Self Assessment).
The penalty-free year (what “soft landing” really means)
HMRC has confirmed that 2026/27 is a “soft-landing” year for late quarterly submissions. In its 23 July 2026 release HMRC put it plainly: “No penalty points will be issued for late quarterly updates during the first year of MTD for Income Tax.” The mechanism it is switching off is a points system rather than a flat fine. From the second year, you collect one penalty point for each missed quarterly deadline, and once four points have accumulated a £200 fixed penalty is charged. Points expire after a period of compliance. The same release is equally plain about the limit of the concession: “Penalties do still apply for late Self Assessment returns and late payments.”
It is important to understand what the soft-landing does and does not cover:
What is forgiven
- Late quarterly submissions: no £200 penalty for missing a quarterly deadline in 2026/27.
- Late filing of the quarterly update specifically: HMRC has indicated it will be lenient on the format and timing of quarterly submissions in the first year.
What is NOT forgiven
- Late payment of tax due on the final declaration. The 31 January 2028 tax payment deadline is unchanged and unrelated to the soft-landing year. Late payment penalties and interest still apply.
- Failure to keep digital records at all. The legal duty to keep digital records and use compatible software starts on 6 April 2026 and is not subject to the soft landing.
- Inaccurate or careless returns. Penalties for errors remain in force at the standard rates.
- Final declaration penalties. Late filing of the final declaration after 31 January 2028 is subject to the usual £100 initial penalty plus daily and tax-geared penalties for longer delays.
The soft-landing is best thought of as one specific concession: missed quarterly deadlines do not trigger automatic £200 penalties in 2026/27. The rest of the MTD framework, including the obligation to be using compatible software and keeping digital records, applies in full.
What you need to do (sole trader and landlord checklist)
Step 1: Confirm you are in scope
Look at your 2024/25 Self Assessment return. Add up your gross self-employment income (turnover from Box 9 on the Self Employment supplementary pages) and your gross property income (rent received from the Property pages). If the combined figure is above £50,000, you are in scope for 2026/27.
Step 2: Sign up for MTD ITSA
Sign-up is via GOV.UK. You can also be signed up by an accountant or bookkeeper acting on your behalf as an agent. Sign-up should happen before your first quarterly submission. The August 2026 deadline means practical sign-up needs to happen by July 2026 at the latest, ideally earlier to give your software time to bed in.
Step 3: Choose compatible software
HMRC publishes a list of MTD ITSA compatible software. The major commercial options include:
- Xero: popular with small businesses; mid-range pricing.
- QuickBooks (Intuit): widely used; tiered pricing.
- FreeAgent: popular with sole traders; sometimes free as a NatWest, Royal Bank of Scotland, or Mettle business account benefit.
- Sage Accounting: entry-level options for sole traders.
- 123 Sheets, AbraTax, BTCSoftware: bridging software that connects spreadsheets to MTD.
- HMRC’s free option: a basic compatible service is available for some smaller-income filers; check the HMRC page for current availability and limits.
Most paid options cost £5 to £30 per month. The cheapest free options have limited features, so if you have any complexity (multiple income streams, VAT registration, payroll, property portfolio), pay for the level that actually fits. An independent estimate from Bevan Buckland (May 2026) put typical first-year setup costs for an in-scope sole trader at around £320 once software, learning time, and any one-off bookkeeping clean-up are added in. That is a useful planning figure if you have not previously budgeted for MTD.
Step 4: Get your bookkeeping into the software
From 6 April 2026 onwards, your income and expenses need to be entered into the software. Most users connect their business bank account to the software for automatic transaction import. For 2026/27 the standard pattern is:
- Connect bank feed.
- Categorise transactions (income vs expense, allocated to relevant categories).
- Add any non-bank items (cash purchases, mileage claims).
- Reconcile monthly.
- Submit quarterly via the software at the relevant deadline.
Step 5: If you use an accountant, talk to them now
HMRC’s own data shows that around two-thirds of MTD ITSA sign-ups have come through accountants acting on clients’ behalf. If you already use an accountant or bookkeeper, your priority is to confirm:
- They are MTD-ready themselves and have an agent services account with HMRC.
- Which software they want you to use (or which they will use on your behalf).
- What their fees look like under MTD (often higher than the old annual Self Assessment fee due to quarterly work).
- Who is responsible for which submissions (you and your accountant should both be clear).
What this looks like in 2027 and 2028
The threshold drops in two further steps:
- From 6 April 2027: threshold drops to £30,000. Substantially more sole traders and landlords come into scope.
- From 6 April 2028: threshold drops to £20,000. The majority of small sole traders and small landlords are then in scope.
The qualifying-income test for each year uses the most recent finalised tax return at the time the threshold check is made. The penalty regime tightens from 2027/28 onwards.
FAQ
I think my 2024/25 income was right around £50,000. How do I know if I am in scope?
Look at your 2024/25 Self Assessment return when it is filed. If gross self-employment plus gross property income for 2024/25 is £50,001 or more, you are mandated for MTD from 6 April 2026. If it is exactly £50,000 or less, you are not mandated for 2026/27, but may be from 2027/28 (£30,000 threshold). HMRC also writes to taxpayers who appear to be in scope based on prior returns.
I am below the threshold but I want to use MTD voluntarily. Can I?
Yes, you can opt in to MTD ITSA voluntarily. The HMRC sign-up page allows voluntary registration. The benefits are that quarterly visibility of your tax position may help you set money aside more accurately, and you avoid the rush when your income eventually crosses a threshold. The downside is the extra administrative work compared with one annual return.
I am a landlord with multiple properties. Do I submit separately for each?
No. You submit one quarterly update for all your UK property income combined, and one separate quarterly update for any overseas property. So a landlord with three UK rental properties files one quarterly update covering all three; if one of those properties is in Spain, that goes into a separate overseas property quarterly update.
What if I am both self-employed and a landlord?
You submit one quarterly update for your self-employment and one for your property income (UK property), totalling two quarterly updates per quarter (or three if you also have overseas property). Each is submitted within the same deadline.
Can I still use spreadsheets?
Yes, but you need “bridging software” to send the data from the spreadsheet to HMRC in MTD format. The bridging software is the bit that has to be HMRC-compatible; the spreadsheet itself can be Excel, Google Sheets, Numbers, or anything else. Some accounting software products include a spreadsheet-bridging feature.
What if I miss the 7 August 2026 quarterly deadline?
Because 2026/27 is a soft-landing year, you will not be charged the standard £200 penalty for the missed quarter. But that does not mean nothing happens: HMRC may still contact you, your record-keeping is still legally required, and habits set in year one tend to carry into year two when penalties bite. Submit late but submit; do not skip.
I have closed my self-employed business mid-year. What do I do?
You still need to submit quarterly updates for the parts of the year you were trading, and a final declaration as usual. The software handles a cessation of trade through the standard cessation entry. Tell HMRC and your accountant when the cessation date falls.
Where to go from here
- HMRC on MTD for Income Tax: gov.uk – Making Tax Digital
- HMRC’s list of compatible software: gov.uk – find compatible software
- Sign up for MTD ITSA: gov.uk – sign up as an individual
- HMRC helpline for Self Assessment and MTD: 0300 200 3310 (Monday to Friday, with the usual public-sector wait times).
This article explains the Making Tax Digital for Income Tax rules as of 30 July 2026. It is general information, not personal tax advice. If your tax position is complex, a qualified accountant or tax adviser can review your specific situation; you can find one via the professional bodies (ICAEW, ACCA, ATT, CIOT).