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Making Tax Digital (MTD) for Income Tax became mandatory this year for sole traders and landlords with qualifying income over £50,000 and the first quarterly update deadline hits in August.

Meeting the deadline

The first quarterly update period runs from 6 April to 5 July 2026, with a submission deadline of 7 August 2026.

Some customers use calendar quarters instead, with the first period running from 1 April to 30 June, but the submission deadline is the same nevertheless.

Quarterly updates must be sent through HMRC-recognised compatible software. This does not replace your annual tax return, which is still due by the usual 31 January deadline.

What happens if the deadline is missed?

HMRC has confirmed a soft landing for the first year of MTD. No penalty points will be issued for late quarterly updates during the 2026/27 tax year and missing the 7 August deadline will not trigger an immediate fine.

However, it is still a legal requirement to meet the deadline and HMRC will record those who have done so.

In the final weeks before the first deadline, HMRC confirmed that around 400,000 taxpayers were still to register for MTD, so the levels of non-compliance are expected to be high.

The initial concessions run out in April 2027 when the points-based penalty system comes into effect.

Under this system, each missed quarterly deadline earns one penalty point. Once you reach four points, HMRC issues a fixed £200 penalty, with a further £200 charged for every subsequent late submission while you remain at the threshold.

These points remain on your file until you submit all outstanding updates and you meet all subsequent deadlines for 24 consecutive months.

Make sure you avoid late submissions

Late submissions should be avoided at all costs.

You must keep digital records and report them on time. Falling behind now makes the next update and your eventual tax return more challenging to prepare.

Building the habit of timely digital record keeping now will make the shift to the full penalty regime next year far less stressful.

If you have not yet submitted your first quarterly update or you are unsure whether MTD applies to you, our team can help you get on track.

Get in touch for support with MTD and your quarterly reporting obligations.

A new consultation paper from the Government has set out how Income Tax Self Assessment (ITSA) payments could move to a more regular, in-year footing.

The new proposals, which formed part of the latest Tax Update, follow on from recommendations made in the Autumn Budget 2025.

How could tax payments change in future?

From April 2029, taxpayers with sufficient PAYE income will be required to make ITSA payments through PAYE each payday, based on their forecasted ITSA liability.

The forecast will be based on the taxpayer’s last filed tax return and divided into equal payments across the year.

Taxpayers will be able to update their forecast using more recent information, with payments adjusting accordingly.

It is proposed that the amount collected through PAYE in any pay period would be capped at 50 per cent of PAYE income.

The consultation asks whether this threshold needs more flexibility for certain groups.

Impact on employers

Employers collect PAYE, so this change will create extra work. Tax codes are likely to change more frequently and some employers currently paying PAYE quarterly may need to switch to monthly payments as amounts collected increase.

Views are being sought on what additional support employers might need through the transition.

Reform of payments on account

From April 2029, the Government may increase the frequency of Payments on Account (POAs) for those subject to Self Assessment outside of PAYE, potentially making them quarterly or monthly.

This would bring them forward so they fall within the same tax year as the income they relate to and will, most likely, rely on information provided via Making Tax Digital.

These direct ITSA POAs would be forecast from past Self Assessment returns, with taxpayers able to update their forecast if needed.

Actual liability would still be reported and balancing payments or repayments settled when the next return is completed.

Taxpayers will keep the ability to contact HMRC if their POA no longer reflects their liability and a wider use of payment plans is being considered.

Why is the change happening?

Under the current system, there can be a delay of up to 22 months between someone earning income and paying tax on it.

This can lead to unexpectedly high tax bills, sometimes referred to as bill shock, for some taxpayers.

Around one in five ITSA tax bills are currently paid late. Spreading payments more evenly across the year, closer to when the income is earned, should make budgeting easier and reduce the risk of falling into tax debt.

The reforms will not affect how much tax is owed, only when it is paid.

What to look out for

There will also be a transition year, where payments for the previous tax year continue alongside the new in-year payments.

The consultation closes on 4 August 2026, with a Government response expected in autumn 2026 and legislation to follow ahead of the April 2029 start date.

If you would like advice on the proposed changes to ITSA payments, please get in touch with our team.