After years of announcements, delays, guidance, software changes and a frankly heroic number of letters from HMRC, Making Tax Digital for Income Tax is finally here.
The first mandatory quarterly update was due by 7 August 2026 for sole traders and landlords with qualifying income over £50,000. HMRC estimated that more than 864,000 people were within scope for the first year of MTD.
So…how many actually made it through the first deadline?
By 12 August, HMRC reported that just over 570,000 people had signed up, and more than 436,000 had successfully submitted their first quarterly update.
Put another way, around a third of the people HMRC expected to use MTD had not even signed up by the time the first deadline passed, and only around half of the expected population actually submitted an update.
That probably tells us two things.
First, despite HMRC’s considerable publicity campaign, many sole traders and landlords still either don’t realise MTD applies to them, don’t understand what they are supposed to do, or have simply decided not to think about it yet.
Secondly, more than 436,000 people did successfully make their first submission.
And that second figure is worth remembering, because MTD has acquired a reputation for being far more frightening and complicated than the quarterly submission itself really is.
The biggest change is not actually sending information to HMRC four times a year. It is the requirement to keep suitable digital records throughout the year so you can produce those updates. The quarterly update itself is simply a summary of the income and expense information held in those records…it is not another full tax return.
Now that the first deadline has passed, we have a much better idea of what MTD looks like in the real world. Plenty of confusion remains; several myths refuse to die, and quite a few people missed the first deadline altogether.
If you are one of those taxpayers, then the good news is that, for this first year at least, that is not the disaster you might think.
So...how did the first deadline actually go?
The short answer is: better than the early sign-up figures suggested, but there is still a very large group of people who have not engaged with MTD at all.
HMRC’s response is quite interesting.
From September 2026, it will begin automatically signing up people whose records indicate they should already be using MTD, with the process taking place in stages. It also plans to write to people who have missed their first quarterly update.
Which does rather raise the question of why automatic sign-up was not the starting point.
HMRC already knows what income was reported on previous tax returns and, in many cases, has a pretty good idea who is likely to fall within the rules. Asking hundreds of thousands of taxpayers to voluntarily complete a separate sign-up process was perhaps always optimistic.
For anyone who has not signed up yet, though, the important point is that ignoring MTD is unlikely to make it disappear. HMRC is now actively moving people into the system where it believes they should already be there.
What if you missed the first MTD deadline?
If 7 August came and went without your first quarterly update being submitted, the important thing is not to panic…but also not to ignore it.
HMRC has deliberately taken a softer approach for the first year of MTD. No penalty points will be issued for late quarterly updates for the 2026/27 tax year.
That means missing the first quarterly deadline does not automatically result in a fine.
However, the soft landing does not mean the quarterly updates are optional. You still need to submit any outstanding updates before you can file the 2026/27 tax return.
Remember that the relaxation applies only to quarterly MTD updates. The normal deadlines for filing tax returns and paying tax still matter, and penalties can still apply if you miss them.
In later years, HMRC takes a stricter approach. Missing a quarterly deadline can result in a penalty point and, once four points have been accumulated, a £200 penalty. Further missed deadlines can then trigger additional £200 penalties.
So the first year is best viewed as a chance to get used to the new system rather than a year in which the rules do not apply.
If you missed the first deadline because you haven’t signed up, don’t have suitable software in place, or simply had no idea you were supposed to do any of this, there is still time to get everything sorted before the next quarterly deadline.
The biggest problem so far: nobody really understands what MTD actually is
One of the clearest lessons from the first few months of MTD is that many people still don’t really understand what has changed.
A very common reaction is:
“But I already file my tax return online...isn’t that already Making Tax Digital?”
Unfortunately, no.
Submitting a Self Assessment tax return online once a year is not the same thing as MTD for Income Tax.
The real change is that, under MTD, sole traders and landlords within the rules are expected to keep suitable digital records throughout the year and use compatible software to send summary information to HMRC every quarter.
Those quarterly updates are not four extra tax returns.
They are simply updates based on the income and expense information recorded in the software during that period. You do not calculate and pay your final tax bill every quarter, and the figures do not need to include all the accounting and tax adjustments normally made when the annual tax return is prepared.
At the end of the tax year, the annual tax position is finalised through MTD-compatible software, taking account of any year-end adjustments, reliefs and other income that need to be included.
So, in simple terms:
MTD is not four tax returns a year. It is digital record-keeping throughout the year, four quarterly summaries, and then a final annual submission.
That distinction matters, because the quarterly filing itself is usually the easy part.
The bigger change is getting into the habit of keeping records up to date during the year rather than gathering everything together months later when the tax return is due.
For many people, that is the bit that will take the most getting used to.
Common MTD myths
MTD has generated a remarkable number of myths, half-truths and understandable misunderstandings. Here are some of the ones we hear most often.
“HMRC can see my bank account now”
No.
If BBK handles your MTD bookkeeping, we normally have access to the bank account transactions we need to keep your records up to date and prepare the quarterly submissions. To reduce the number of transactions that we see, you might want to consider having a separate bank account for your business.
HMRC does not receive your bank feed as part of the quarterly update.
HMRC receives summary information from your digital records, such as income totals and the relevant expense categories. It does not receive a copy of your bank statement or every individual transaction.
“I have to file four tax returns a year”
You do not.
The quarterly updates are not full tax returns. They summarise the income and expense information recorded during the quarter.
Your overall tax position is still finalised after the end of the tax year, when any year-end adjustments, reliefs and other income are taken into account.
“I have to pay my tax every quarter now”
Again, no.
MTD changes how you keep records and how you report information to HMRC. It does not currently change the normal Self Assessment payment dates.
Submitting a quarterly update does not generate a quarterly tax bill. However, after you submit the update, you can see an estimate of your tax bill through your MTD software (or your HMRC online account), which may help you plan how much to set aside during the year.
“Every quarterly update has to be completely final and perfect”
This is another common worry, but the quarterly updates are not intended to be fully adjusted year-end accounts.
Each quarterly update is cumulative from the start of the tax year. This means that if something needs correcting later, you can reflect the amended figures in a later quarterly update rather than going back and resubmitting an earlier one.
HMRC also does not require you to make all accounting and tax adjustments before each quarterly submission. You can deal with those adjustments when the annual position is finalised.
That does not mean the records can be wildly inaccurate, of course, but it does mean you don’t need to treat every quarterly update as though it were a set of final accounts.
“MTD means I have to buy expensive accounting software”
Not necessarily. MTD requires compatible software, but free and low-cost options are available. We look at this in more detail below, including the options we use for BBK clients.
“HMRC will automatically put me into MTD”
This one is particularly understandable.
HMRC already has a lot of information about taxpayers from previous tax returns, so many people assumed that if they were required to join MTD, HMRC would simply enrol them.
Originally, that was not the case. Taxpayers had to sign themselves up.
After the first filing deadline, HMRC has announced it will begin automatically signing up people whose records indicate they should already be in MTD.
So if you haven’t signed up because you assumed HMRC would do it for you, that assumption wasn’t entirely unreasonable…it was just slightly ahead of HMRC.
“I already file my tax return online, so I’m already doing MTD”
Unfortunately not.
Filing a Self Assessment return online is not the same as MTD. The key difference is the requirement to keep digital records during the year and submit quarterly updates through compatible software.
This is probably the biggest source of confusion, and one reason so many people have been caught by surprise.
What BBK actually does for clients under MTD
For most of our clients, MTD does not mean learning a new piece of software or suddenly becoming a bookkeeper.
If we are dealing with MTD for you, the practical process is much more straightforward.
We normally have access to the bank transactions and other records we need, so we can keep the bookkeeping up to date throughout the year. We then review and categorise the transactions, deal with any queries that arise, and use those records to prepare and submit the quarterly updates to HMRC.
The key distinction is that we see the underlying transactions because we do the bookkeeping. HMRC does not receive your bank feed as part of the quarterly submission.
HMRC receives the relevant summary totals produced from those records.
For clients who already keep their records digitally, the change may be fairly small. For others, particularly those who have historically handed everything over once a year for their tax return, the biggest adjustment is simply moving to a more regular bookkeeping routine.
There may still be the odd query during the quarter, for example, where a payment is unclear, or a receipt is missing, but the aim is to deal with those things while they are still fresh rather than trying to reconstruct them months later.
So while MTD creates some extra reporting during the year, it doesn’t mean you need to become an expert in bookkeeping or tax software yourself.
That is our job.
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Does MTD mean expensive software?
One understandable concern about MTD is that it sounds as though everybody now needs a full accounting software subscription.
They do not.
Some clients may qualify for a free FreeAgent licence, and where that is not suitable, we also have lower-cost software options available. You certainly do not automatically need a £40 or £50-a-month accounting package just because you are within MTD.
The key is choosing software that does the job properly and fits how you’ll manage your records.
There is also an important distinction between software cost and accountant cost.
A free software licence does not mean there is no cost involved in MTD if you want us to deal with it for you. We still need to maintain the records, review the transactions, deal with queries and prepare the quarterly submissions.
But MTD certainly does not have to mean adding an expensive software subscription on top.
And for many smaller sole traders and landlords, keeping the software side simple is often the best approach.
Is MTD really as scary as people expected?
For all the noise around MTD, the actual quarterly submission is probably the least frightening part of the whole process.
The first deadline has also shown that, once the bookkeeping is up to date, the actual quarterly submission is generally fairly straightforward
The real change is getting the records into a suitable digital system and keeping them updated regularly enough to produce the quarterly figures.
That is where most of the adjustment is.
For someone who has always kept good digital records, MTD may feel like a relatively small change. For someone who has historically gathered up a year’s worth of bank statements, receipts and invoices shortly before their tax return is due, it is a much bigger shift in routine.
And that is also why some of the anxiety around MTD has been slightly misplaced.
People often worry about the act of “filing quarterly”, when the more important question is really:
Are your records up to date throughout the year?
If they are, the filing part should not be particularly dramatic.
There will inevitably be some teething problems, especially while taxpayers, accountants, software providers and HMRC all get used to the new system. But the first deadline has at least shown that MTD is manageable in practice.
It may be inconvenient. It may require a change in habits. And it may not be anybody’s idea of a fun way to spend an afternoon.
But it is probably not as scary as many people expected.
Are there actually any benefits to MTD?
We are not going to pretend that sole traders and landlords have been crying out for more frequent reporting to HMRC.
But MTD does offer some genuine benefits in how it encourages record-keeping.
The biggest one is simply that bookkeeping is dealt with more regularly.
Instead of trying to remember what a payment from nine months ago related to, questions can be picked up while the transaction is still relatively fresh. Missing invoices, duplicated costs and personal transactions mixed in with business spending are also more likely to be spotted earlier.
Keeping records up to date can also give you a better idea of how the business is actually performing during the year, rather than only finding out once the annual accounts or tax return are prepared.
There’s also a potential cash flow benefit. If your records are current, it should be easier to get an indication of what your tax position might look like and set money aside accordingly.
And when the tax year ends, much of the groundwork has already been done.
That should mean less time spent reconstructing a year’s worth of records, fewer last-minute queries and a smoother annual tax return process.
Of course, none of that requires MTD in order to be good practice. Businesses have always benefited from keeping decent, up-to-date records.
MTD has simply removed some of the option to leave it all until later.
Whether you consider that a benefit may depend on how organised you were to begin with.
What are the next MTD deadlines?
If you have made it through the first quarterly update, the next three deadlines for the 2026/27 tax year are:
- 7 November 2026
- 7 February 2027
- 7 May 2027
These quarterly updates cover the tax year as it progresses, with the final annual position dealt with after the year-end.
One source of confusion is that the 2025/26 Self Assessment tax return still follows the old system.
That return is still due by 31 January 2027, as usual.
The first full tax year under MTD is 2026/27, with the final annual submission due by 31 January 2028.
So, for a while, the old and new systems overlap.
If you are already within MTD, the practical focus now is to keep the bookkeeping up to date so the next quarterly update doesn’t become a last-minute scramble.
And if you missed the first one, the soft landing means you still have time to get back on track before the next deadline arrives.
Who joins MTD next?
MTD does not stop with the first group of taxpayers who joined in April 2026.
From 6 April 2027, the qualifying income threshold falls from £50,000 to £30,000, which means a much larger group of sole traders and landlords will be brought into the system.
If you’re currently below the £50,000 threshold but above £30,000, the next few months are a useful opportunity to get organised before MTD becomes compulsory.
The important figure is qualifying income, which broadly means your gross income from self-employment and property before expenses are deducted.
If you have more than one source of qualifying income, HMRC looks at them together. So, for example, someone with £20,000 of sole trader income and £15,000 of rental income could be brought into MTD even though neither source individually exceeds £30,000.
Employment income, pensions and most other non-business income do not count towards the MTD qualifying income threshold.
HMRC will use information from previous tax returns to identify people it believes should join, but it is still worth checking your own position rather than assuming you will only need to think about it when a letter arrives.
The main lesson from the first year is probably this: MTD is much easier to deal with when the bookkeeping system is sorted out before the first quarterly deadline is looming.
If you are likely to fall within the £30,000 threshold from April 2027, now is a much better time to work out what software, bank feeds and bookkeeping process you will use than next summer.
MTD Frequently Asked Questions
For the 2026/27 tax year, HMRC is operating a soft landing and will not issue penalty points for late quarterly updates.
That does not mean you can simply ignore the update. You still need to submit any outstanding quarterly information, so the best approach is to catch up rather than wait for the next deadline.
No.
If BBK handles your bookkeeping, we usually have access to the relevant bank transactions so we can keep your records up to date and prepare the quarterly submissions.
HMRC receives summary totals from those records. It does not receive your bank feed, your bank statement or a list of every individual transaction.
A digital record is simply a record of your business or property income or expenses that is created and stored electronically. It will normally include the amount, the date and the relevant income or expense category.
That might mean transactions coming into accounting software through a bank feed, invoices being entered into software, or records being maintained in a spreadsheet that forms part of an MTD-compatible system.
It does not mean every receipt has to be scanned and uploaded, or that HMRC needs to see copies of all your paperwork.
The important thing is that the records needed for MTD are kept digitally and can flow through to the software used to make the quarterly submissions without being manually retyped between systems.
No.
MTD changes how records are kept and how information is reported during the year. It does not currently introduce quarterly Income Tax payments.
Your normal Self Assessment payment dates still apply.
Not necessarily.
You do need MTD-compatible software, but that does not automatically mean paying for an expensive accounting package.
Some clients may qualify for a free FreeAgent licence, and we also have lower-cost options when a full accounting package isn’t needed.
From 6 April 2027, MTD for Income Tax will apply where your total qualifying income from self-employment and property exceeds £30,000.
That is based on gross income before expenses, and different sources of qualifying income are added together.
If you are not sure whether the rules apply to you, it is worth checking well before April so you have time to put the right bookkeeping and software arrangements in place.
Conclusion
MTD has finally moved from something that was always “coming soon” to something hundreds of thousands of people are actually doing.
The first deadline has shown that there is still plenty of confusion, but it has also shown that the process itself is much less dramatic once the right bookkeeping system is in place.
If you missed the first deadline, the first-year soft landing gives you time to get back on track…but MTD has not gone away. And if you are due to join from April 2027, getting organised now will make the transition considerably easier.
If you are not sure whether MTD applies to you, whether you should already have signed up, or what you need in place for the next deadline, we can help you work out the simplest way to deal with it.
