Missed the first Making Tax Digital deadline? Here’s what to do now

The first Making Tax Digital for Income Tax quarterly deadline has now passed.

More than 864,000 sole traders and landlords were due to submit an update by 7th August 2026. If you were one of them and missed the deadline, there is some good news: HMRC will not issue penalty points for late quarterly updates during the first year. The less comforting news is that you still need to keep digital records and bring your submissions up to date.

Here is what you need to know.

Who had to meet the 7th August deadline?

Making Tax Digital for Income Tax (MTD) became compulsory for the first group of taxpayers on 6th April 2026.

You should normally be using MTD this year if all the following apply:

• You are registered for Self Assessment as a sole trader or landlord
• You submitted a Self Assessment tax return for 2024/25
• That return showed you had total qualifying income of more than £50,000 from self-employment and /or property

Note that the £50,000 test applies to income before expenses, not profit.

It also combines your qualifying sources of income. For example, imagine your sole-trader business had turnover of £40,000, and you also received £15,000 in gross rental income. Your combined qualifying income would be £55,000, putting you above the threshold.

Only your gross income from self-employment and property counts towards the MTD threshold. Therefore, if you have PAYE earnings or dividends, they don’t count towards the total. You must, though, still include them in your tax return where required.

The threshold will drop to £30,000 from April 2027 and to £20,000 from April 2028. This will bring many more sole traders and landlords into the system. You can check when you need to use MTD on GOV.UK.

What was due on 7th August?

The first quarterly update covered your income and expenses for the opening part of the 2026/27 tax year.

If you use the standard update periods, it covered 6th April to 5th July. If you chose to use calendar quarters, it covered 1st April to 30th June.

The update is not a tax return and does not create an immediate tax bill. Instead, your compatible software adds together the income and expense records you have entered and sends the resulting totals to HMRC.

You do not normally need to make accounting or tax adjustments before sending it. It is essentially a snapshot of your records so far.

Will you receive a penalty for missing the deadline?

Not this time.

HMRC has said that it won’t apply penalty points for late quarterly updates during the 2026/27 tax year. This ‘soft landing’ gives taxpayers time to become familiar with the new system without being penalised for a late quarterly submission.

While this is a useful concession, it isn’t an exemption from the rules.

You must still keep digital records and submit the required quarterly information before you can complete your tax return for the year. Penalties can also still apply if you submit that tax return late or fail to pay tax on time.

From the 2027/28 tax year, the system becomes rather less forgiving. Missing a quarterly deadline will normally earn you a penalty point. Once you reach the four-point threshold, HMRC will issue a £200 penalty, followed by another £200 penalty for each further missed deadline while you remain at the threshold.

Points aren’t permanent if you take action. If you remain below the four-point threshold, your points will expire after 24 months. However, once you have reached the threshold, you can only clear them by meeting HMRC’s conditions. This means you will have to submit everything on time for 12 months and bring any outstanding submissions from the previous 24 months up to date.

You can read the full rules in HMRC’s MTD penalty guidance.

What should you do now?

First, check that you really were required to use MTD from April 2026. The relevant figure is the qualifying income shown by your 2024/25 tax return, not what you expect to earn this year.

If you were in scope, you should then:

1. Make sure you are signed up. Registering for Self Assessment does not necessarily mean you have completed the separate MTD process.
2. Choose compatible software. You cannot submit quarterly updates through the old Self Assessment return or by entering figures directly on the HMRC website. You or your accountant must use compatible software.
3. Bring your digital records up to date. Your software should contain the income and expense records for the relevant period. If you signed up late, you may need to recreate your records from the start of the tax year.
4. Send the outstanding information. Do not wait until the end of the year and assume the missed quarter will look after itself. Speak to your accountant or software provider about bringing your submissions up to date.
5. Prepare for the next deadline. Your next quarterly update is due by 7th November 2026.

The remaining deadlines for the 2026/27 tax year are:

• 7th November 2026
• 7th February 2027
• 7th May 2027

Your tax return for the year will then be due by 31st January 2028.

What if you cannot use digital software?

Some people can apply for an exemption from MTD. This may apply if you are digitally excluded because of your age, a disability, where you live or another reasonable circumstance.

An exemption is not automatic in most cases. You need to apply to HMRC and explain why the digital requirements are not reasonable for you.

If you have already signed up and your circumstances have changed, HMRC says you should continue using MTD while it considers your application. More information is available in its MTD exemption guidance.

Use the first year to fix the process

The lack of a penalty means missing the first deadline is not a financial disaster. But it is a warning that your record-keeping process needs attention.

Quarterly reporting becomes much easier when income and expenses are recorded as they arise. Leave everything until the deadline and you have recreated the annual Self Assessment scramble four times a year.

Good software can reduce the work by importing bank transactions, organising expenses and showing how your income is developing during the year. It can also give you an earlier indication of your likely tax position, making it easier to plan for future payments.

The software still needs to be set up correctly and fed accurate information. Digital records do not become reliable simply because they are digital.

Need MTD-compliant software? We recommend Xero for larger firms, FreeAgent for smaller firms and sole traders, and Hammock for Landlords.

Need help with Making Tax Digital?

If you missed the first deadline, THP can help you establish whether you are in scope for Making Tax Digital, bring your digital records up to date and prepare for the next quarterly submission.

We can also help you choose suitable software and build a record-keeping process that does not turn every quarterly deadline into a minor emergency.

Please use the form to get in touch with our team for advice. We’re looking forward to hearing from you.