Making Tax Digital First-Quarter Checks: What Landlords and Sole Traders Should Do Before August

The first quarterly update under Making Tax Digital for Income Tax is due by 7 August 2026. For standard update periods, it covers digital records from 6 April to 5 July 2026. For those using calendar update periods, it covers 1 April to 30 June 2026. The deadline is the same either way.

If you are a sole trader or landlord with qualifying income over £50,000 based on your 2024/25 Self Assessment tax return, you should already be within the first MTD for Income Tax wave. This article walks through the practical checks to make before the August deadline, what the submission involves, and where the first-year soft landing does and does not protect you.

The Deadlines You Need to Have in Front of You

MTD quarterly updates are not separate mini tax returns for each quarter. Each update is cumulative, meaning it covers the period from the start of the tax year to the end of the update period.

For the 2026/27 tax year, the standard update dates are:

If you use calendar update periods, the dates are 1 April to 30 June, 1 April to 30 September, 1 April to 31 December and 1 April to 31 March. The deadlines remain 7 August, 7 November, 7 February and 7 May.

Our full guide on MTD quarterly update returns covers the mechanics of each submission, and our MTD quarterly reporting walkthrough explains the practical steps from start to finish.

The Soft Landing and What It Does Not Cover

HMRC has confirmed a soft landing for the first year of MTD for Income Tax. If you are required to use MTD from 6 April 2026, HMRC will not apply penalty points for late quarterly updates during the 2026/27 tax year.

That does not mean the updates are optional. You still need to keep digital records and send all quarterly updates before you can submit your 2026/27 tax return through MTD-compatible software.

There are also two areas the soft landing does not cover.

First, penalty points can still apply if your 2026/27 MTD tax return is submitted late. Under MTD, the late submission system is points-based. If you reach the relevant threshold, you receive a £200 penalty.

Second, late payment penalties and interest still apply if tax is paid late. MTD changes how records and submissions are made, but it does not remove the 31 January tax payment deadline. Our HMRC crackdown on late payments post explains the late payment position in more detail, and our piece on tax refunds no longer being automatic is worth reading alongside it.

The sensible approach is to treat the soft landing as a short adjustment period, not a reason to delay.

Check One: Confirm You Are Actually Registered

HMRC does not automatically enrol you into MTD. You, or your agent, must sign up through the service.

You are required to use MTD for Income Tax from 6 April 2026 if your qualifying income was over £50,000 in the 2024/25 tax year. Qualifying income means gross income from self-employment and property before expenses. It can include more than one source.

For example, a sole trader with £28,000 of turnover and £25,000 of rental income has qualifying income of £53,000 and is in scope, even though neither income stream is above £50,000 on its own.

Employment income, dividends, pension income and a partner’s share of partnership profit do not count towards qualifying income. If you are unsure whether your 2024/25 figures put you over the line, your Self Assessment return is the right document to check. Our filing returns for landlords post explains how property income is reported, and working with experienced nottingham accounting firms means someone checks this for you rather than leaving it to chance.

Check Two: Confirm Your Software Is MTD-Compatible and Connected

Not all accounting software can send MTD for Income Tax updates to HMRC. You need software that is compatible with MTD for Income Tax, not just software that keeps digital records.

If you use Xero, check that your MTD connection is active and that your income and expense categories are mapped correctly. Our Xero bookkeeping basics guide covers chart of accounts setup, and our from spreadsheets to Xero walkthrough is useful if you are still moving records across. Our xero bookkeeping services team can handle the setup if you want it done properly from the start.

Bridging software can still be used if you prefer spreadsheets, but digital links must be maintained. Manual copying and pasting between records and submission software can create problems, so make sure the workflow is compliant before the first update is due.

Check Three: Review Your Records for the First Update Period

Your first quarterly update is a summary of income and expenses from the start of your update period to the end of the first period. It is not a full tax return, and you do not need to make every year-end tax adjustment before sending it.

However, the figures should be based on your digital records. Common gaps include missing receipts, unreconciled bank transactions, rental income not separated clearly, mortgage interest not identified, and repairs not yet assessed as allowable.

For landlords, the distinction between repairs and improvements still matters. Our deductible expenses for landlords post explains the difference. Our receipt capture workflow guide helps you avoid missing paperwork, and our bookkeeping health check flags wider record-keeping weak spots before they affect submissions.

Check Four: Make Sure Income Streams Are Set Up Properly

MTD requires you to keep digital records for each relevant self-employment and property business. Your software should be set up so the correct income and expense categories are submitted for each source.

Self-employment income and property income should not simply be merged into one rough total. If you have UK property and foreign property income, or multiple trades, check that your software is treating each source correctly.

The categories used for quarterly updates are based on Self Assessment categories. Getting the mapping right before the first submission avoids having to re-categorise months of transactions later. Our automations in Xero article explains how bank rules and recurring transaction templates can keep categories consistent once they are set up.

For landlords with more complex portfolios, our property management accounts and property management accounting services can support the record-keeping and reporting process. Our landlord accountants team can manage the quarterly cycle end to end if you would rather not deal with it yourself.

Check Five: Understand Jointly Owned Property and Special Cases

Joint property income can be more complicated under MTD. HMRC allows those with jointly let property to include either property income and expenses in quarterly updates, or property income only, with expenses reported later before the tax return is submitted.

If you jointly own property, do not assume your software will automatically treat it correctly. Your share of jointly owned property income counts towards qualifying income, but how expenses are recorded during the year needs care. Our MTD for jointly owned property explainer covers this in more detail.

Sole traders should also check whether basis period reform has created transitional profit calculations. Transitional profits do not count towards qualifying income, but they can affect the final tax position and should be reviewed before the 2026/27 tax return is submitted.

Check Six: Set Up a Tax Reserve

MTD does not change when your tax is due. The 2025/26 Self Assessment return is still due by 31 January 2027, and the 2026/27 MTD tax return is due by 31 January 2028. Payments on account may still apply in the usual way.

One benefit of quarterly updates is that you should see your income and expenses more regularly. Use that visibility to build a tax reserve. Setting aside a percentage of net income each month into a separate account makes January less stressful.

For landlords, our landlord cash flow mastery post explains this habit in detail. The same principle applies to sole traders: the more regularly you review the numbers, the less likely you are to be surprised by the tax bill.

What About Taxpayers Approaching the Threshold?

If you are below £50,000 now but likely to cross a future threshold, it is worth preparing early. The MTD threshold drops to £30,000 from 6 April 2027, based on 2025/26 qualifying income, and £20,000 from 6 April 2028, based on 2026/27 qualifying income.

For newer businesses, our accountants for start ups team can build MTD readiness into the setup from day one. If you are considering incorporation, our sole trader versus limited company guide explains the trade-offs. For property tax planning, our property accountant specialist team can model different structures, and our outsourced finance function service can handle bookkeeping, quarterly submissions and year-end tax return preparation under one engagement.

The 5 quick Xero tips post is a useful companion once you are set up, and our Xero bank reconciliation guide keeps the weekly routine tight. Our why accurate bookkeeping is crucial post sums up why this preparation pays off.

For landlords with more complex income patterns, our short term lets and HMOs accounting article and year end checklist for property portfolios round out the picture.

Frequently Asked Questions

Do I need to send HMRC every individual transaction?

No. Quarterly updates send totals by income and expense category. HMRC does not receive every receipt or invoice, although the digital records must be kept in your software.

What if I make a mistake in a quarterly update?

You can correct errors in later updates because each update is cumulative. Some changes may also be dealt with before submitting the final tax return.

Can I file the first quarterly update early?

Yes. You can submit after the update period ends and before the deadline. HMRC also allows submission up to 10 days before the end of the period if you do not expect any further transactions.

What happens if I miss the 7 August 2026 deadline?

No penalty points apply for late quarterly updates in 2026/27, but you must still submit the update before you can submit your MTD tax return.

Does MTD affect my 2025/26 Self Assessment return?

No. You still file your 2025/26 Self Assessment return by 31 January 2027 in the usual way. MTD quarterly reporting applies from the 2026/27 tax year for those in the first wave.

Ready to Submit Your First Quarterly Update With Confidence

The 7 August deadline is closer than it looks. If you have already signed up, connected compatible software and kept clean digital records from April, the first update should be manageable. If you are still pulling records together or have not registered with HMRC, now is the time to act.

As a trusted team of advisers working with sole traders, landlords and property investors across Nottingham and nationwide, we handle the full quarterly cycle so nothing slips through the cracks. Call us on 0115 648 8686 or get in touch through our website to book a free, no-obligation conversation.

Kellee Quigley

I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.