More than 436,000 sole traders and landlords have now sent their first Making Tax Digital for Income Tax quarterly update, according to HMRC. But the more important number for small business owners may be the gap that remains: more than 570,000 people have signed up, and HMRC says it will begin enrolling customers who should be using the system but have not joined from September.
For sole traders already within the rules, this is a prompt to check that their records, software and HMRC registration are properly connected. For those approaching the next income threshold, it is an early warning to prepare before Making Tax Digital becomes mandatory for them.
Who is currently covered?
Making Tax Digital for Income Tax became mandatory in April 2026 for sole traders and landlords with qualifying income above £50,000. Qualifying income broadly means gross income from self-employment and property before expenses and tax are deducted.
Those in scope must keep digital records and send summaries through HMRC-compatible software each quarter. Most customers’ first quarterly period ran from 6 April to 5 July 2026, with a deadline of 7 August. HMRC says 436,000 customers successfully submitted that first update.
The threshold is due to fall to more than £30,000 from April 2027, bringing many more sole traders into the system. A business that is outside the rules today may therefore have only a few months to select software, organise its records and understand the new reporting routine.
Late first update? Act now, but do not panic
HMRC says customers who missed the first quarterly deadline can still send their update. No penalty points will be issued for late quarterly updates during the 2026 to 2027 tax year.
That temporary breathing space should not be mistaken for an exemption. Quarterly reporting is still a legal requirement for those in scope, and HMRC says that from September it will start signing up customers who should be using the service but have not registered. This will happen in stages.
Voluntary sign-up gives an owner more control over checking that HMRC holds the right details and over choosing compatible software. Waiting for HMRC to act could compress the time available to fix record-keeping gaps or resolve software authorisation problems.
Quarterly updates do not replace the tax return
A common source of confusion is the relationship between quarterly reporting and Self Assessment. HMRC describes quarterly updates as short summaries of business income and expenses sent through compatible software. They are not tax returns.
The 31 January Self Assessment deadline remains. People within Making Tax Digital must complete their quarterly updates so that they can submit their tax return through the new process. The familiar responsibilities around filing and paying tax therefore continue alongside the new digital record and reporting duties. Owners planning their cash position may also find our guide to the Self Assessment July payment useful.
What small business owners should check now
First, confirm whether your qualifying income puts you within the current £50,000 threshold. If you have more than one self-employment or property income source, check the official calculation rules rather than looking at one activity in isolation.
Second, make sure the software you use appears on HMRC’s compatible-software list and is authorised to communicate with the Making Tax Digital service. Simply keeping a spreadsheet or using accounting software does not necessarily mean the submission connection is active.
Third, review whether your digital records include each source of self-employment and property income and the relevant expenses. A regular monthly bookkeeping routine will usually be easier than reconstructing a quarter immediately before a deadline.
Fourth, if the first update is outstanding, send it as soon as the records are ready. The penalty holiday removes points for a late quarterly update this year, but it does not remove penalties that may apply to late tax returns or late payments.
Finally, businesses expecting qualifying income above £30,000 should plan for April 2027 now. That means discussing responsibilities with an accountant or bookkeeper, testing compatible software and deciding who will review each quarterly submission. The practical change is less about pressing a button four times a year and more about maintaining accurate digital records continuously.
HMRC says new guidance will be published in late August for people who receive a letter about being signed up. Until then, the safest approach is to use the official GOV.UK guidance, verify your position and avoid leaving software and record checks until the next quarterly deadline.
