HMRC's new digital reporting regime for the self-employed and landlords faces its first real test on 5 August 2026, when the earliest cohort of businesses brought into Making Tax Digital for Income Tax must submit their first quarterly update. The requirement applies to sole traders and landlords whose qualifying income exceeded £50,000 in the 2024/25 tax year, a group HMRC's own impact assessment put at roughly 780,000 people ahead of the mandatory start date on 6 April 2026. A second wave, covering income above £30,000, joins the scheme from April 2027, and the government has said it intends to lower the threshold further before the current Parliament ends, though no confirmed date has been set for that stage.
What Changed on 6 April 2026
Under the new rules, affected sole traders and landlords can no longer file a single annual Self Assessment return covering their business or property income at the end of the year. Digital records of income and expenses must instead be kept throughout the year in HMRC-recognised software, with a summary submitted roughly every three months. The cycle culminates in a final declaration once the tax year ends, reconciling the four quarterly submissions into the actual tax liability and standing in for the return that would previously have covered the same period. Income from employment, pensions, savings and other sources outside the qualifying trade or property business is unaffected and continues to be reported in the usual way at year end, alongside the final declaration rather than inside it.
The April 2026 start date follows several years of delay. HMRC's original timetable envisaged Making Tax Digital for Income Tax launching in 2018, before the department pushed the date back first to 2023, then to 2024, and eventually settled on the phased 2026/2027 structure now in force after successive governments cited concerns about small business readiness and software availability. A limited voluntary pilot ran alongside the old system for several years before the mandate took effect, giving early participants and their accountants a working test of the quarterly cycle before it became compulsory for the wider £50,000 group.
Qualifying income is calculated on gross turnover from self-employment and property combined, before expenses are deducted — a distinction that has caught out some landlords with high rental turnover but comparatively thin margins once mortgage interest and letting agent fees are accounted for. A landlord with £55,000 in gross rent and a £40,000 mortgage still falls inside the mandate under the £50,000 test, because the threshold looks at turnover rather than profit, and no allowance is made for how much of that turnover is actually retained.
The Mechanics of the 5 August Deadline
By default, quarterly periods follow the tax year rather than the calendar year: 6 April to 5 July, 6 July to 5 October, 6 October to 5 January, and 6 January to 5 April. Each submission is due one calendar month after its quarter closes, which makes 5 August 2026 the deadline for the very first period most businesses in scope will report under the new regime. Software providers including FreeAgent, Xero, QuickBooks and Sage have built the submission function directly into their existing accounting packages, while businesses that keep records in a spreadsheet can route the same figures through bridging software rather than switching systems entirely.
Calendar-quarter reporting — 1 April to 30 June and so on — is available as an alternative inside some software products, though take-up has reportedly been limited, since most accountants defaulted clients to the standard tax-year quarters when MTD software was first configured over the past year.
Penalties Follow the Points System Already Running for VAT
A missed quarterly submission does not trigger an automatic fine on its own. HMRC instead applies the same points-based late submission penalty framework already in force for VAT: each missed deadline adds one point, and a taxpayer filing on a quarterly cycle reaches the penalty threshold at four points within a rolling 24-month period. Once that threshold is reached, a fixed £200 penalty applies, with a further £200 following for every subsequent missed submission for as long as the taxpayer remains at or above the threshold. Points expire after a period of consistent on-time filing, so an isolated late submission early in the scheme carries less consequence than a repeated pattern would.
That penalty sits alongside, not instead of, the existing late-payment penalty and interest regime that already governs Self Assessment balances and the 31 January and 31 July payment dates. Missing a quarterly update is a separate compliance failure from missing a payment. HMRC has been explicit that the quarterly submissions do not themselves generate a tax bill — the actual liability is still calculated and settled through the final declaration and the payment dates that already existed before the mandate began.
What the Records Actually Need to Show
Compatible software has to capture income and expenses at a level of detail HMRC can map onto the categories used in the final declaration, not simply a running total carried in a notebook or a single spreadsheet cell. In practice that means:
- Separate records for each qualifying trade or property business, where a taxpayer holds more than one
- Expense categories that broadly mirror the Self Assessment property and self-employment pages, rather than one lump-sum figure entered at year end
- A digital link between the point where a transaction is first recorded and the figure eventually submitted to HMRC, with no manual re-typing in between — the core "digital record-keeping" requirement that gives the scheme its name
- Retention of records for broadly the same period as under existing Self Assessment rules, among other obligations that carry over largely unchanged from the system MTD replaces
HMRC publishes and regularly updates its list of recognised software, and products outside that list cannot be used to meet the mandate, regardless of how thoroughly the underlying records are otherwise kept.
Exemptions and the Partnership Gap
Not everyone with qualifying income above £50,000 is inside the mandate this year. General partnerships are not currently part of the scheme — the government said in 2022 that partnerships would join at a later, unscheduled date, and nothing further has been announced since. Taxpayers who can demonstrate they are unable to use software because of age, disability, remoteness of location or another reason HMRC accepts can apply for a digital exclusion exemption, a provision that mirrors one already available under Making Tax Digital for VAT. Applications are made by phone or in writing rather than through the online service used for standard registration, and HMRC assesses each one individually rather than granting exemptions automatically on the basis of the reason given. A decision, and confirmation of what reporting method applies instead if the exemption is granted, follows in writing once the case has been reviewed.
The £30,000 Threshold, and What Comes After It
From April 2027, the mandate extends to sole traders and landlords with qualifying income above £30,000, a considerably larger population than the initial £50,000 cohort. The government confirmed the direction of travel in the Autumn Budget 2024, stating an intention to lower the threshold to £20,000 later in the current Parliament, though it has not yet set a firm date or laid the secondary legislation that stage would require. Accountants preparing clients for the 2027 threshold have generally started the same process now being completed for the £50,000 group — registering for MTD through HMRC's online service, selecting compatible software, and running at least one quarter of parallel record-keeping before the mandate actually applies to them.
For the roughly 780,000 already inside the scheme, 5 August is less a single event than the first of sixteen quarterly deadlines due before the first final declaration is filed in early 2028. Whether that first submission runs smoothly across the sector is likely to shape how the larger, lower-threshold group approaches the same deadline a year from now.