Making Tax Digital: the first deadline has passed – what happens next?

Making Tax Digital for Income Tax (MTD) has reached its first major milestone. More than 436,000 taxpayers sent their first update for the 2026/27 tax year, according to HMRC. More than 570,000 customers have now signed up to the service.

The first quarterly deadline fell on 7th August, covering the opening quarter of the 2026/27 tax year. For those already using the system, however, this is not the end of the process. It marks the beginning of a new way of managing and reporting income and expenses.

What happens after the first quarterly update?

MTD requires qualifying sole traders and landlords to maintain digital records and send HMRC quarterly updates through compatible software.

These updates provide HMRC with summaries of income and expenses for each relevant business or property source. They are not tax returns, and there is no need to make the usual year-end accounting or tax adjustments before submitting them.

The next quarterly update deadline for the 2026/27 tax year is 7th November 2026, followed by 7th February 2027 and 7th May 2027.

For taxpayers who have already completed their first update, attention should therefore turn to keeping records accurate and up to date throughout the next quarter, rather than waiting until another deadline approaches.

What if you have not submitted your first update?

There is some time for those who have missed the first deadline.

HMRC has confirmed that there will be no penalties for late quarterly updates during the 2026/27 tax year. However, the obligation to keep digital records and submit the required updates remains.

HMRC has also said it will begin signing up customers from September who need to use MTD but have not yet done so.

This means that anyone who believes they should already be using the system should not simply wait for HMRC to contact them. It is worth checking whether they fall within the requirements and taking the necessary steps to get set up.

Who needs to use Making Tax Digital?

The first phase applies to sole traders and landlords with qualifying income of more than £50,000, based on their relevant self-assessment information.

The rollout will then widen:

• From 6th April 2027, the requirement will apply to those with qualifying income over £30,000.
• From 6th April 2028, it will extend to those with qualifying income over £20,000.

So while the first deadline has only affected part of the self-employed population, many more businesses and landlords will need to prepare for MTD over the next two years.

The real change is how records are kept

For those coming into MTD, the biggest adjustment may not be the quarterly submission itself. It is the requirement to maintain digital records throughout the year.

Income and expenses need to be recorded digitally and compatible software must be used to send the quarterly information to HMRC.

That makes good bookkeeping more important than ever.

Rather than treating accounts as something to organise once a year before submitting a self-assessment return, businesses will increasingly need to maintain accurate records as part of their normal financial routine.

For some business owners, this could be a useful shift. Keeping records current can give a much clearer picture of how a business is performing, what it is spending and how much tax may ultimately be due.

What should businesses do now?

For those already within MTD, the period immediately after the first submission is a good opportunity to review how the process is working.

Businesses should consider whether:

• their accounting software is correctly connected to HMRC
• income and expenses are being recorded consistently
• receipts and supporting records are being retained digitally
• their bookkeeping is being kept up to date rather than left until the quarterly deadline
• they understand when their next update is due
• they have considered the potential tax liability shown through their updated figures

Those who are not yet required to use MTD but expect to fall within the £30,000 or £20,000 thresholds should also consider getting their systems in order now rather than waiting for their mandatory start date.

Need help with Making Tax Digital?

If you’re unsure whether MTD applies to you, have missed your first quarterly update or want to make sure your records and software are set up correctly, the team at Verallo can help.

Get in touch to discuss your requirements.