More than 436,000 sole traders and landlords have now successfully submitted their first Making Tax Digital for Income Tax quarterly update, with over 570,000 customers signed up to the service overall. If you are one of the many landlords or sole traders who have not yet sent an update, or you are still unsure whether the rules apply to you, this is a good moment to take stock.
From September 2026, HMRC will begin signing up customers who should be using the service but have not yet done so, so acting now puts you back in control rather than waiting to be contacted.
Key Takeaways
- Making Tax Digital for Income Tax has been mandatory since April 2026 for sole traders and landlords with qualifying income over £50,000
- The first quarterly update covered 6 April 2026 to 5 July 2026 (or 1 April to 30 June 2026 for those using calendar quarters), with a submission deadline of 7 August 2026
- There are no penalty points for late quarterly updates during the 2026 to 2027 tax year, though penalties still apply to late tax returns and late payments
- From September 2026, HMRC will begin proactively signing up customers who should already be in the regime but have not registered
- Qualifying income is gross income before expenses, not profit, and is assessed from your Self Assessment return for the relevant prior tax year
- The qualifying income threshold drops to £30,000 from April 2027, then to £20,000 from April 2028, bringing more landlords and sole traders into scope in stages
- Points-based penalties for missed quarterly deadlines begin from the 2027 to 2028 tax year, starting 6 April 2027
- Landlords who included residence pages (SA109) in their 2024 to 2025 return are automatically exempt for the 2026 to 2027 tax year, effectively pushing their start date to April 2027
- Anyone without a UK National Insurance number before the start of the tax year is automatically exempt and cannot sign up at all, which is particularly relevant for overseas landlords
Where Things Stand
The rollout of Making Tax Digital for Income Tax has moved from a future requirement to a live obligation for a large group of sole traders and landlords. Anyone earning more than £50,000 from self-employment or property income has been required to keep digital records and send quarterly updates to HMRC since April 2026, and the figures published so far point to strong early take-up of the new system. HMRC has described the update process as taking only minutes once compatible software is in place, and has reported positive feedback from early adopters.
It is worth being clear about what a quarterly update actually is, because the terminology is confusing. A quarterly update is not a tax return. It is a short digital summary of income and expenses sent through HMRC-recognised software, and it does not carry the same weight or complexity as a Self Assessment return. However, the two are linked in practice: taxpayers within Making Tax Digital for Income Tax are required to submit their quarterly updates as part of meeting their annual filing obligations, before completing their Self Assessment return. The Self Assessment deadline itself remains unchanged at 31 January.
If You Have Not Yet Sent an Update
If your first quarterly update is outstanding, there is no penalty for submitting it late during the current tax year, so this is not a cause for panic. That said, delaying does carry a practical downside. From September 2026, HMRC will begin actively signing up customers who ought to be in the regime but have not registered themselves. Being signed up this way means HMRC sets the timing rather than you, whereas signing up voluntarily lets you choose when you start, which software you use, and gives you time to make sure your details are set up correctly from the outset.
New guidance is expected in late August 2026 covering what to do if you receive a letter from HMRC confirming you have been signed up under this process, so it is worth keeping an eye out for updates if you have not yet registered.
The MTD Threshold is Changing
The £50,000 qualifying income threshold that triggered the April 2026 start date was based on income for the 2024 to 2025 tax year, and it is only the first step in a phased reduction. From April 2027, the threshold drops to £30,000, based on qualifying income for the 2025 to 2026 tax year. From April 2028, it falls again to £20,000, based on qualifying income for the 2026 to 2027 tax year. Each stage draws a considerably wider group of sole traders and smaller-scale landlords into the regime.
It is worth being precise about what qualifying income actually means, since this is where many landlords misjudge their position. It is your combined gross income from self-employment and property before expenses are deducted, not your profit, and HMRC assesses it from the Self Assessment tax return you submitted for the relevant prior year rather than your current year’s figures. A landlord with £52,000 in gross rental income and modest allowable expenses is over the £50,000 threshold on that basis alone, even if their taxable profit after expenses is considerably lower. If your rental or self-employment income sits between £20,000 and £50,000, it is worth planning rather than waiting until your particular threshold takes effect, particularly if you will also need time to select and set up compatible software.
Choosing Compatible Software
Quarterly updates must be submitted through HMRC-recognised software rather than manually through an online portal. This is one of the more significant practical shifts for landlords who have historically managed their records through spreadsheets, since digital record-keeping is now a legal requirement alongside the quarterly submissions themselves. For clients weighing up their options, our own MTD-compatible platform, RentalBux, is built specifically around the record-keeping and reporting needs of property landlords, and can simplify the transition for those managing rental income across one or more properties.
Penalties: What Applies Now & What is Coming
No penalty points are being issued for late quarterly updates during the 2026 to 2027 tax year, which gives customers a genuine grace period while the system beds in. This leniency does not extend to Self Assessment returns or tax payments, where the usual penalty regime continues to apply.
From 6 April 2027, a points-based penalty system comes into force for missed quarterly deadlines. Each missed deadline adds one penalty point, and once four points accumulate, a fixed £200 penalty is charged. Points expire after a sustained period of compliance. Given this timeline, the 2026 to 2027 tax year is effectively a practice run, and it makes sense to use it to bed in a reliable quarterly routine before penalties start to bite.
A Note for Overseas Landlords
Sterling Wells works with a significant number of non-UK resident landlords and overseas property investors, and there are two specific points in the rules worth flagging for this group.
The first concerns residence status. If you needed to include the residence pages (SA109) in your 2024 to 2025 Self Assessment return, you are automatically exempt from Making Tax Digital for Income Tax for the 2026 to 2027 tax year, without needing to contact HMRC. You will then need to start using the service from the 2027 to 2028 tax year onwards if your qualifying income was above £30,000 in the 2025 to 2026 tax year. If you did not include the SA109 pages last year but reasonably expect to need them in your 2025 to 2026 or 2026 to 2027 return, you can apply to HMRC for the same temporary exemption rather than receiving it automatically. Either way, this is a delay rather than a permanent exemption, so it is worth using the extra time to prepare.
The second point applies more broadly to overseas landlords than the residence rules do: anyone without a UK National Insurance number before the start of the relevant tax year is automatically exempt and cannot sign up for Making Tax Digital for Income Tax at all, regardless of income level. This is a genuinely useful exemption for overseas landlords who have never needed to obtain an NI number. However, it is worth confirming your own position carefully, since it will not apply once an NI number is issued.
Beyond these specific exemptions, living outside the UK does not otherwise change the underlying rules: once you are in scope, the same digital record-keeping and quarterly update obligations apply as for UK-based landlords, and the practical hurdles of coordinating software access, digital records, and quarterly approvals from abroad are worth planning for well in advance.
Exemptions
Beyond the residence and National Insurance number points covered above, there are two other routes to exemption worth knowing about. The first is automatic and permanent: if your qualifying income is £20,000 or less, you do not need to use Making Tax Digital for Income Tax at all, and there is nothing you need to apply for. The second must be applied for and is narrower than many people expect: HMRC will consider an exemption on the grounds of being digitally excluded, for reasons such as age, a health condition or disability, certain religious beliefs incompatible with digital communication, or a genuine lack of internet access with no suitable alternative nearby. Being unfamiliar with accountancy software, having only a small number of records, previously having filed a paper tax return, or the extra time and cost involved in signing up are explicitly not accepted as grounds for this exemption. A handful of other automatic exemptions also exist, largely for specific groups such as Lloyd’s underwriters, farmers and creative artists claiming averaging relief, foster carers, ministers of religion, and those receiving Married Couple’s or Blind Person’s Allowance, though these apply to a smaller number of clients. If you believe you may qualify for any exemption, this is worth confirming formally with HMRC rather than assuming, since the default position is that the rules apply once your income exceeds the relevant threshold.
Conclusion
The first quarterly update cycle has demonstrated that the Making Tax Digital for Income Tax system is now operating at scale, with over half a million customers signed up and the large majority of those already submitting successfully. For sole traders and landlords who have not yet engaged with the process, the message from HMRC is straightforward. There is no penalty for acting now, but there will be less flexibility and control if you wait to be contacted from September 2026 onwards. With the qualifying threshold falling to £30,000 from April 2027 and £20,000 from April 2028, and penalties starting from the 2027 to 2028 tax year, the coming months are the right window to get digital records and software in place before the rules tighten further.
FAQ
If you are a sole trader or landlord with qualifying income from self-employment or property above £50,000, you have been required to comply since April 2026. The threshold falls to £30,000 from April 2027, then to £20,000 from April 2028.
No. Qualifying income is your gross income from self-employment and property combined, before expenses are deducted. HMRC assesses it from the Self Assessment return you submitted for the relevant prior tax year, not your current year’s figures, so it is worth checking your turnover rather than your taxable profit when judging whether you are in scope.
No. A quarterly update is a short digital summary of income and expenses sent through compatible software. It does not replace your Self Assessment tax return. Still, taxpayers within Making Tax Digital for Income Tax are required to submit their quarterly updates as part of meeting their annual filing obligations, before completing their end-of-year submission.
Not for the 2026 to 2027 tax year. No penalty points apply to late quarterly updates during this period, although penalties still apply to late Self Assessment returns and late payments.
From September 2026, HMRC will begin signing up customers who should be in the regime but have not registered. Signing up voluntarily allows you to choose your own timing and software and ensure your details are accurate from the start.
Generally yes, but two exemptions are worth checking. If you included residence pages (SA109) in your 2024 to 2025 return, you are automatically exempt for the 2026 to 2027 tax year, pushing your start date to April 2027. Separately, anyone without a UK National Insurance number before the start of the tax year is automatically exempt and cannot sign up at all. Neither is a permanent exemption from the underlying rules once you no longer meet the criteria.
Yes. Qualifying income of £20,000 or less is automatically exempt, as is anyone without a UK National Insurance number. A digitally excluded exemption also exists but must be applied for and has narrow qualifying criteria. If you think you may qualify for any of these, this should be confirmed formally with HMRC rather than assumed.
