Compliance
Getting Ahead of Making Tax Digital: What Sole Traders and Landlords Need by August 7 2026
Sole traders and landlords earning over £50,000 must submit their first quarterly Making Tax Digital update by 7 August 2026 — here's how to prepare now to stay compliant and avoid penalties.
By NomadicTax Research Team • 5-8 min read • August 11, 2026
## What is Making Tax Digital (MTD) for Income Tax?
MTD for Income Tax is HMRC’s legal requirement for sole traders and landlords with qualifying income over **£50,000** to keep digital records and submit **quarterly updates** rather than waiting for the full Self Assessment return. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
## Key Deadlines and Obligations
- **First quarterly update due:** 7 August 2026 (covering income and expenses from 6 April 2026 to 5 July 2026) ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
- **Tax return deadline remains:** 31 January 2027 for the 2025-26 tax year ([gov.uk](https://www.gov.uk/self-assessment-tax-returns/deadlines?source=post_page---------------------------&utm_source=openai))
- **Payments on account:** second instalment due by **31 July 2026** for many Self Assessment taxpayers ([gov.uk](https://www.gov.uk/government/publications/agent-update-issue-145/issue-145-of-agent-update?utm_source=openai))
## What You Need to Do Now
1. **Confirm you’re in the scope.** If you're a sole trader or landlord with **gross income (before expenses)** above £50,000 – or expect to be – you must comply. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
2. **Register with compatible software.** MTD-approved software is mandatory. Make sure the one you use (or plan to use) is recognised by HMRC. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
3. **Begin digital records.** Already required as part of MTD: keep income, expenses accurately, update records throughout the year. Ensure you correct errors as soon as they appear. ([gov.uk](https://www.gov.uk/guidance/use-making-tax-digital-for-income-tax/updates?utm_source=openai))
4. **Plan cashflow earlier.** Quarterly updates provide early visibility into your likely tax liability, but payments still fall due at year end; adjust savings accordingly. Use software forecasts. Example: if your estimated liability after first quarter is £3,000, putting aside £1,000 monthly can help avoid being hit all at once.
5. **Seek support.** HMRC resources, webinars, agent support available. If you're new, act sooner rather than later. There is **no penalty** for missed quarterly updates **in the first year**, but late Self Assessment returns or payments will incur penalties. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))
## Common Pitfalls and How to Avoid Them
| Problem | Solution |
|---|---|
| Using non-approved software or paper methods | Verify software’s certification; don’t delay setup |
| Not keeping up with records during busy periods | Schedule weekly/monthly catch-ups |
| Underestimating the tax due in year | Build regular estimates; adjust payments on account accordingly |
## Example Scenario
Sarah is a freelance graphic designer earning £70,000 in 2025-26, with £20,000 expenses. She signs up for MTD-approved software by early July and files her first quarterly update by 7 August, showing net profit of £12,500 after expenses. The system estimates her liability including tax, Class 2/4 NI, and suggests budgeted payments. When the full Self Assessment return is due in January 2027, rather than facing a sudden large bill, she has already made progress towards meeting her obligations.
## What happens next?
From **April 2027**, threshold drops to **£30,000**, and to **£20,000** from **April 2028**. If your income is close to that, keep an eye on upcoming changes. ([gov.uk](https://www.gov.uk/government/news/deadline-approaches-for-first-making-tax-digital-quarterly-update?utm_source=openai))