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Posted: Tue 28th Jul 2026
10 min read
The first quarterly deadline under Making Tax Digital (MTD) for Income Tax lands on Friday 7 August, and for founders who've never filed one before, it's easy to assume "no penalties" means "no rush". It doesn't.
If your income from self-employment and property came to more than £50,000 on your 2024/25 tax return, this deadline applies to you. The quarter it covers – 6 April to 5 July – closed over three weeks ago, so everything you need to report has already happened.
Here is what the deadline involves, the one misunderstanding that could catch you out, and what to do with the days you have left.
You may have heard that HMRC is going easy in year one. That is true, up to a point. No penalty points apply to late quarterly updates in the 2026/27 tax year.
But the updates are not optional. Every quarterly update must still be submitted before you can complete your final declaration, the year-end submission that replaces your Self Assessment return. Miss the updates, and you block your own tax return.
And the tax return deadline still carries penalties as normal. You will still receive a penalty point if your 2026/27 return is late. The soft landing covers the quarterly updates, nothing else.
David Ashdown, director of We Are MTD, which helps sole traders and landlords manage their MTD quarterly submissions without having to handle the process themselves, warns against reading too much into the first-year leniency.
"Do not be reassured by the fact that HMRC is not applying penalty points to late quarterly updates during the first year," he says.
"No penalties does not mean no deadline, and it certainly does not mean there are no consequences. The update still has to be completed, and outstanding quarterly submissions will need to be dealt with before the end-of-year tax return can be filed."
So, treat 7 August as a real deadline. The habits you build this quarter carry into a year when the points count.
The test is your qualifying income: gross income from self-employment and property combined, before expenses. It is turnover, not profit.
HMRC has been writing to people in scope, but no letter does not mean no obligation.
The responsibility to check sits with you, and HMRC's online checker takes a few minutes and also covers exemptions, including for those who are digitally excluded.
If you think an exemption applies, apply now rather than waiting. ICAEW warns that those wanting certainty before the deadline should not delay.
Less than you might fear. A quarterly update is not a tax return.
Your software adds up your digital records into totals for each income and expense category and sends them to HMRC. There are no accounting or tax adjustments to make at this stage.
David sees the same misunderstanding come up again and again.
"The biggest mismatch is that many founders expect the quarterly update to be either another full tax return or a simple form they can complete at the last minute," he says.
"In reality, the submission itself is relatively light-touch. It is essentially a summary of income and expenses for the quarter, rather than a fully adjusted tax return."
The harder part, he explains, is what sits behind that summary:
"The business must be properly signed up, its records need to be maintained digitally, and the quarterly figures must be sent through an HMRC-compatible process.
"That does not necessarily mean buying a major accounting package or taking on an expensive software subscription, but it does mean the old approach of gathering everything together once a year will no longer be enough."
Founders, he adds, will need to decide whether to manage the digital records and submissions themselves or appoint someone to do it for them.
"So the real challenge is not necessarily the quarterly update itself. It is establishing a reliable process that works every three months."
Mistakes are not fatal either. Updates are cumulative, and each submission overwrites the last, so an error this quarter is corrected automatically in the next.
Once you have sent an update, you will see an estimate of your tax bill building through the year, which, for many founders, is the first genuinely useful thing MTD does.
There is one decision to make before you press send. Software defaults to tax year quarters ending 5 July, so if you prepare your accounts to 31 March, select calendar update periods first – you cannot change it for the rest of the tax year.
Check your 2024/25 return against the £50,000 threshold using HMRC's tool.
Choose HMRC-recognised software if you have not already. Free and low-cost options exist, and our guide to getting started walks through the choice.
Sign up for Making Tax Digital today. ICAEW warns that data issues can delay the sign-up process, and with 10 days left, there is no slack to absorb one.
Get the quarter's income and expenses into your software. The quarter is closed, so you can submit as soon as your records are in. Provisional figures are acceptable and can be corrected later.
If an accountant files for you, make sure they are authorised to act for you under MTD before the deadline, not on it.
Nothing is due to be paid on 7 August. Payment dates are untouched – your 2026/27 bill is settled through the final declaration, due by 31 January 2028, with payments on account as before.
If you are under the threshold, your turn is coming. The qualifying income threshold falls to £30,000 from April 2027 and £20,000 from April 2028, based on your 2025/26 and 2026/27 returns.
David's advice to founders below the current threshold is to start checking now, not later.
"They should begin by checking whether they are likely to fall within the rules," he advises.
"The threshold is based on qualifying gross income from self-employment and property before expenses, not the amount of profit they eventually pay tax on. Income from more than one relevant source can also count towards the total."
He also points founders towards a choice worth making early:
"The next step is to decide how their records and quarterly submissions will be handled.
"Some founders may be comfortable maintaining digital records and making the updates themselves.
"Others may prefer an affordable managed service that completes the submissions for them, without requiring them to become bookkeepers or learn a new accounting system."
We have long argued that the smallest firms need fair access to genuinely affordable MTD-compatible tools, and we will keep making that case as each wave joins.
In the meantime, the founders who find this easiest are the ones who start their digital records now, threshold or not.
David notes:
"The businesses that prepare gradually and choose the right approach will probably find MTD manageable.
"Those that ignore it until HMRC tells them a deadline is approaching are far more likely to experience unnecessary cost, confusion and stress."
A week is enough time to do all of this. Assuming "no penalties" means "no deadline" is the only way to run out of it.
David's closing message is a simple one:
"Start now, establish exactly what is missing and give yourself time to put it right. The first deadline should be used to create a workable routine for the future, not treated as a one-off administrative scramble."
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