MORE than 864,000 sole traders and landlords signed up to Making Tax Digital (MTD) for Income Tax have just two weeks left before the deadline to submit their first quarterly update, HM Revenue & Customs announced today.
Some small business owners said the process is “pretty painless” while others said it “feels like a compliance treadmill”.
Making Tax Digital for Income Tax became mandatory from April 2026 for sole traders and landlords with qualifying income over £50,000.
The first quarterly update covers income and expenses for the first three months of the tax year. The deadline for submitting it to HM Revenue and Customs (HMRC) is 7 August 2026.
HMRC says the update is not a tax return but rather a short summary sent directly to HMRC through recognised software, which takes just minutes to complete.
Some software includes digital support tool HMRC Assist, which gives tailored feedback to help customers spot potential errors before submission. Customers, HMRC adds, remain responsible for ensuring their return is accurate.
After each update, users can see an estimate of their tax bill, helping them to plan ahead.
Craig Ogilvie, HMRC’s Director of Making Tax Digital, said: “This is a landmark moment for the tax system. Hundreds of thousands of sole traders and landlords are now keeping digital records and will be sending their first quarterly update in the coming weeks.
“For those already using software, this should be straightforward and take minutes. If you haven’t signed up yet, there is still time – visit GOV.UK and search ‘Making Tax Digital for Income Tax’ to get started.”
Making Tax Digital is now a legal requirement and customers in scope, HMRC adds, should check now that they are signed up, that their software is compatible and submit their update before the deadline.
It will extend to those earning more than £30,000 from April 2027, and to those earning more than £20,000 from April 2028.
The tax return deadline remains 31 January. Quarterly updates do not replace the tax return – customers will still need to submit their return and pay any tax owed by the 31 January 2027.
Matthew Knight, Chief Freelance Officer at Freelancing.Support, said most of the freelancers he supports who are doing their first quarterly MTD report found the process “pretty painless”.
He added: “The anxiety around getting things set up, registered, doing the admin and submitting things might be larger than the task itself.
“However, this first round of people in MTD, who don’t have penalties applied, and are more likely to have accounting support are not the true litmus test.
“When the threshold drops to £30k next year, it will affect many who have been pushed into self-employment, and may not be able to easily afford software, accounting advice or the time to do more frequent admin.
“HMRC will need to be on hand to support those who need the most support.”
Harvey Dhillon, CEO at small business accountants, Zmartly, said “the software is not what trips people up, not knowing that the eligibility test applies to you is”.
He continued: “Whether you are caught was decided by your 2024-25 return, the one filed last January, measured on turnover before expenses, with self-employment and property added together.
“HMRC’s own example: £25,000 of rent plus £27,000 of self-employment is £52,000, so on that basis you are in, even if profit is far lower.
“Making Tax Digital catches you on what you turned over, not on what you live on. The first update covers 6 April to 5 July, due by 7 August.
“It is a summary, not a mini tax return: no tax to pay, and cumulative, so a later update fixes an earlier one. There are no penalties for a late quarterly update in 2026-27. So check the turnover on your 2024-25 return before the August deadline.”
Samuel Mather-Holgate, Managing Director at Swindon-based Mather and Murray Financial, believes MTD is adding an extra burden for already busy people.
He added: “Making Tax Digital may sound neat in Whitehall, but for many accidental landlords and small business owners it feels like a compliance treadmill designed by people who have never filed a tax return after a long day’s work.
“Quarterly updates, digital records and software costs may be manageable for accountants, but they are a big ask for people with one rental property or a modest sideline income.
“The risk is that ordinary taxpayers spend more time learning systems than running their affairs. HMRC should be helping people get tax right, not turning occasional landlords into unpaid bookkeepers.”
Bob Singh, Founder at Uxbridge-based Chess Mortgages, said landlords are going to be hit hard by the new legal requirement.
He added: “MTD is yet another ill-thought-out policy designed to put off small businesses from expanding to higher levels of turnover because they will be forced to spend more time filing returns.
“The inclusion of rents in this £50,000 per annum limit makes no sense. Anyone with two or three properties will now have to file their returns four times a year.”
