The first major Making Tax Digital for Income Tax deadline is now close. Sole traders and landlords brought into the regime from 6 April 2026 must submit their first quarterly update by 7 August 2026. HM Revenue & Customs says more than 864,000 people are in scope for this first phase, and the update must be sent through HMRC-recognised compatible software.
For many small-business owners, the practical difficulty is not the submission itself. It is making sure the right software is connected, records are complete and income and costs have been captured digitally from the beginning of the tax year. The good news is that this first update is designed to be a summary of what has already been recorded, rather than a full tax calculation or a replacement for the annual tax return.
This guide sets out who needs to act, what to prepare before 7 August, how to avoid confusing a quarterly update with a tax return, and how to use better records to gain a clearer view of cash flow throughout the year.
Who needs to submit a Making Tax Digital update by 7 August?
Making Tax Digital for Income Tax became mandatory from 6 April 2026 for individuals who are registered for Self Assessment, receive income from self-employment, property or both, and had qualifying income above £50,000 in the 2024/25 tax year.
Qualifying income means gross income before expenses from self-employment and property. It is not profit, and it does not include every possible source of personal income. For example, a sole trader with £48,000 of business turnover and £6,000 of gross rental income would have qualifying income of £54,000, even if their business expenses substantially reduce the profit they eventually pay tax on. HMRC explains the threshold and what counts towards it in its qualifying-income guidance.
Those required to use Making Tax Digital this year should normally have received contact from HMRC. However, waiting for a letter is not a safe compliance strategy. HMRC says it remains the taxpayer’s responsibility to check whether they are in scope and to be ready to use the service. Sole traders who have only recently changed accountant, business address, software or trading arrangements should take particular care to confirm their position.
The phased rollout continues after this year. The threshold is scheduled to reduce to more than £30,000 of qualifying income for the 2025/26 tax year, bringing people into Making Tax Digital from 6 April 2027, and to more than £20,000 for the 2026/27 tax year, with mandatory use from 6 April 2028. The current timetable is set out in HMRC’s eligibility guidance.
The 7 August deadline in plain English
The first quarterly update covers the opening three months of the 2026/27 tax year: 6 April 2026 to 5 July 2026. It must be submitted by 7 August 2026.
For each self-employment or property business, compatible software takes the digital records maintained during the quarter and produces category totals for income and expenses. Those totals are then sent to HMRC. If a taxpayer has both a trade and a property business, they need to make sure each source has been set up correctly and that the relevant records are being kept.
HMRC’s standard cycle gives the same filing date to customers using standard update periods. The next deadlines are 7 November 2026, 7 February 2027 and 7 May 2027. Software may display the period and due date differently where a taxpayer uses calendar update periods, so owners should check the dates presented in their own system rather than relying solely on a diary entry.
Do not leave the job until the evening of 7 August. A missing bank feed, an unapproved software connection, duplicated transactions or a question for an accountant can turn a short submission into a stressful last-minute exercise. Aim to have the review completed several working days ahead of the deadline, leaving time to resolve any discrepancies.
A quarterly update is not your annual tax return
This distinction matters. A quarterly update is a periodic summary of income and expenses from digital records. It is not a final statement of taxable profit, it does not settle the tax bill and it does not replace the end-of-year tax return.
HMRC specifically says that taxpayers do not need to make accounting or tax adjustments before submitting a quarterly update. In practical terms, that means you do not have to finalise every year-end item before 7 August. You are reporting the transaction totals recorded for the period, not completing the whole annual compliance process in miniature four times a year.
The year-end process remains important. After the final quarterly update, the taxpayer will use compatible software to check records, make any necessary adjustments, claim reliefs or allowances, include other income and gains, and submit the final tax return. For the 2026/27 tax year, the deadline is 31 January 2028. Tax due must also be paid by that date. HMRC’s step-by-step timetable confirms both the quarterly deadlines and the later final deadline.
This structure can feel unfamiliar to owners used to doing most of their bookkeeping in a rush near 31 January. It is better viewed as a change in rhythm: keep records as business happens, submit summaries each quarter, then complete the final tax position once the year has ended.
Your practical Making Tax Digital checklist before 7 August
1. Confirm that you are in scope
Start with the 2024/25 Self Assessment return. Add gross self-employment and property income, before deducting expenses, and check whether the result exceeded £50,000. If you are unclear about unusual circumstances, such as a short first trading period, jointly owned property, ceased income or a change to a previously filed return, review HMRC’s guidance or speak to a qualified tax adviser.
Some people may be exempt, including those who are digitally excluded and cannot reasonably use digital tools because of age, disability, remoteness of location or another relevant reason. There are also certain automatic exemptions. An exemption is not assumed merely because digital record keeping is inconvenient or unfamiliar; it needs to meet HMRC’s criteria. See HMRC’s exemption guidance before deciding you do not need to act.
2. Check that your software is genuinely compatible
Spreadsheets, a banking app or general bookkeeping software are not automatically enough. You need software that works with Making Tax Digital for Income Tax and can maintain the required digital records and submit the quarterly update to HMRC. HMRC does not provide the software itself, so check the provider’s functionality, pricing, user permissions, support arrangements and whether it handles your particular mix of trade and property income.
Most importantly, do not assume that an existing subscription has been activated for the new service. Log in and verify that the product is set up for Making Tax Digital for Income Tax, not simply VAT or ordinary bookkeeping. HMRC provides a list of compatible software, but business owners should still check with the provider that the product meets their needs.
3. Sign up and authorise the connection to HMRC
Being eligible is not the same as being signed up. Before a submission can be sent, the taxpayer or their agent must sign up for the service and authorise the chosen software to connect to HMRC. Owners need to be registered for Self Assessment and, in most cases, must have submitted a tax return in the last two years before they can sign up.
If you use an accountant or tax agent, clarify who is doing each task. Your agent may sign you up and prepare the update, but you remain responsible for checking the underlying information and agreeing the submission process. Agree a cutoff date for sending receipts, invoices, mileage details and explanations of unusual transactions.
4. Bring records up to date for 6 April to 5 July
Review every income source and expense category for the first quarter. Reconcile the business bank account, payment processor, cash sales, invoices, supplier bills and card transactions. If you use a personal account for occasional business spending, capture those transactions too, while keeping clear evidence and a consistent explanation.
A useful review question is simple: can you explain the difference between money received and sales recorded, and between money paid out and expenses recorded? Timing differences are normal, but unexplained gaps often reveal missing invoices, duplicated feeds, cash transactions or personal spending incorrectly coded as business costs.
5. Check categories rather than chasing perfection
The update contains totals for the income and expense categories used in your records. Review coding carefully, especially for regular problem areas such as motor costs, travel, subscriptions, repairs, equipment, subcontractors, home-working costs and mixed personal-business purchases.
That said, do not confuse a sensible review with the final year-end adjustment exercise. The quarterly update is a summary. HMRC says no accounting or tax adjustments are required before it is sent. If you know a matter needs proper year-end treatment, keep the evidence and flag it for your accountant, rather than delaying the quarterly update unnecessarily.
6. Submit, save proof and create a repeatable routine
Once you are satisfied the quarter is complete, submit through the compatible software and retain the confirmation. Save a PDF or screenshot if your system allows it, and note the submission date. Then put the next review dates in the diary now.
A simple monthly routine is usually easier than a quarterly scramble: upload or photograph receipts, raise invoices promptly, reconcile the bank, review unpaid customer invoices and approve the transaction coding. By the next deadline, the work should be a short review rather than a reconstruction of three months of activity.
How digital records can improve cash-flow visibility
Compliance is the immediate reason to act, but properly maintained digital records can produce a more useful management benefit: a current view of the cash moving through the business. This is particularly valuable for sole traders whose income varies with project timing, seasonal demand, delayed customer payments or irregular major purchases.
Consider a freelance technical consultant. In April, their bank balance looks healthy because two large invoices have been paid. Without current records, it is easy to treat that balance as available cash. Once the software shows outstanding VAT obligations where relevant, unpaid supplier costs, regular overheads, personal drawings and a provisional tax reserve, the picture becomes clearer. The owner can make a better decision about whether to invest in equipment, take on a contractor or preserve cash for a quieter month.
Or consider a landlord who receives rent reliably but faces intermittent repair costs. Recording income and expenses as they arise makes it easier to see whether a property is generating enough cash to cover routine maintenance and a reserve for larger repairs. It also makes missing rent, duplicate maintenance invoices and sudden increases in utility or management costs more visible earlier.
Making Tax Digital does not turn a quarterly update into a real-time tax bill, and software estimates should not be treated as professional tax advice. However, owners can use the information as a planning signal. A practical approach is to review three figures every month: cash actually in the bank, invoices due from customers or tenants, and a ring-fenced amount for expected tax and unavoidable costs. The difference between turnover and spendable cash is often where small-business pressure begins.
Separate business banking can make this much easier. When business receipts and payments run through one account, bank feeds are cleaner, reconciliation takes less time and the audit trail is easier to follow. It also reduces the risk of overlooking income or spending because it has become mixed with household transactions.
Late updates: do not rely on the first-year concession
HMRC says it will not issue penalty points for late quarterly updates during the first year of Making Tax Digital for Income Tax, covering the 2026/27 tax year. This should give some breathing space to businesses finding their feet, but it is not a reason to ignore the 7 August deadline.
Late Self Assessment returns and late tax payments can still attract penalties. More importantly, a late first update can leave a business with a larger clean-up exercise before the next deadline. From the second year onwards, the points-based system is expected to apply to missed quarterly deadlines: one point for each missed deadline, with a £200 fixed penalty once four points are accumulated. HMRC’s latest deadline announcement explains the first-year approach.
The best response to an incomplete record is usually to submit a good-faith, accurate summary based on the records available, then seek advice where an issue requires correction or further action. Do not knowingly enter invented figures simply to make a deadline. If the problem is technical, document what happened, contact the software provider promptly and keep evidence of the steps taken.
Conclusion: treat 7 August as the start of a better operating habit
The first Making Tax Digital deadline is a compliance milestone, but it can also be a useful reset for how a small business runs its finances. By 7 August 2026, in-scope sole traders and landlords should have checked eligibility, signed up, connected compatible software, brought first-quarter records up to date and submitted their quarterly summary.
Remember the central point: this is not the annual tax return. It is a quarterly update built from digital records. Use that lighter-touch requirement to establish a monthly bookkeeping routine, improve visibility over income and spending, and reduce the pressure that traditionally builds as January approaches.
Act now: open your software today, confirm the HMRC connection, reconcile the period from 6 April to 5 July, and arrange support from your accountant or software provider before the deadline becomes a last-minute problem.
