The first mandatory Making Tax Digital (MTD) for Income Tax quarterly deadline has passed, and nearly half of affected taxpayers missed it.
The submission deadline was 7 August 2026. On 12 August, HM Revenue and Customs (HMRC) reported that over 436,000 sole traders and landlords submitted their first update. HMRC originally expected about 864,000 people to enter this first phase. These numbers show that roughly 428,000 people have not sent their required update.
This issue is now reaching a critical stage. From September 2026, HMRC will start automatically enrolling taxpayers who should use MTD but failed to register themselves.
Who Must Follow the New MTD Rules?
MTD for Income Tax became mandatory on 6 April 2026 for sole traders and landlords with qualifying gross income above £50,000.
What is Qualifying Income?
It is your total income from self-employment and property combined before deducting expenses.
If HMRC automatically signs you up starting in September, your setup work is far from finished. You must still:
- Verify all income sources linked to your online account.
- Choose HMRC-compatible software.
- Keep digital financial records.
- Submit your quarterly updates.
HMRC selects taxpayers for automatic setup using details from 2024/25 tax returns. If your business structure or property income changed after that tax year, you must correct your income records in your MTD account.
No Q1 Penalty Points, But You Must Still File
HMRC is offering temporary flexibility during the initial rollout. The tax authority confirmed it will not issue penalty points for late quarterly updates during the 2026/27 tax year.
However, this grace period does not clear your filing duty. You must still send any overdue Quarter 1 update immediately. Standard penalties and interest charges still apply for late Self Assessment tax returns and late tax payments.
Key MTD Timeline & Deadlines
| Date | MTD Milestone | Action Required |
|---|---|---|
| 7 August 2026 | Q1 Update Deadline | Cover income/expenses for 6 April – 5 July. |
| September 2026 | HMRC Auto-Enrolment | HMRC begins force-registering eligible non-filers. |
| 7 November 2026 | Q2 Update Deadline | Cover income/expenses for 6 July – 5 October. |
| 17 August 2026 | Exemption Window | Applications open for digital exclusion exemptions. |
Delaying your first update creates a heavy workload later. Taxpayers who miss Quarter 1 must prepare that update while simultaneously compiling their Quarter 2 report due on 7 November 2026.
HMRC also updated its official exemption guidance on 17 August 2026. People due to enter MTD in April 2027 can now apply for an exemption if digital reporting is unreasonable for them. HMRC assesses each exemption request individually.
Action Plan: What You Should Do Now
If you missed the 7 August deadline, take these steps immediately:
- Check Your Eligibility: Review your total self-employment and rental turnover from the 2024/25 tax year.
- Review HMRC Records: Log into your government gateway to ensure HMRC lists your active income sources correctly.
- Select Compatible Software: Choose software that connects directly with HMRC to record income and costs, such as the cloud-based accounting platforms that Lanop supports.
- Submit Overdue Updates: Bring your digital records up to date and file your Q1 update right away.
- Talk to an Expert: Consult an accountant now instead of waiting for an HMRC auto-enrolment letter.
Future Expansion Phases
Taxpayers earning below £50,000 must also prepare for upcoming expansion dates:
- April 2027: MTD becomes compulsory for qualifying incomes above £30,000.
- April 2028: MTD expands to cover qualifying incomes above £20,000.
How Lanop Can Help With MTD
Although the first deadline passed, you can still build an accurate digital reporting process before the next deadline.
At Lanop Business & Tax Advisors, we help sole traders and landlords stay fully compliant. Our chartered team can:
- Confirm whether MTD rules apply to your business.
- Review and correct the income records HMRC holds for you.
- Setup and integrate HMRC-compatible software.
- Update your digital accounting records.
- File your quarterly reports accurately ahead of the 7 November deadline.
Do not view this year’s penalty waiver as a reason to postpone setup. HMRC is actively advancing the MTD rollout. Contact Lanop today to protect your business and resolve your filing status.
