The Quarter Nobody Was Told to Watch
Since 6 April 2026, HMRC has required sole traders and landlords with combined self-employment and property income above £50,000 to keep digital records and report quarterly instead of waiting for the familiar January tax return. That threshold is based on income reported on the 2024/25 Self Assessment return, not on how much you happen to be earning right now, which means some people who assumed they were comfortably clear of it opened a letter from HMRC earlier this year confirming they'd been pulled into Making Tax Digital for Income Tax — MTD ITSA, in the inevitable HMRC shorthand — whether they'd planned for it or not. Roughly 864,000 sole traders and landlords fall into this first wave. The mechanics are simple to describe and, for plenty of people, genuinely disruptive to actually carry out: instead of one annual tax return, you now send HMRC four quarterly updates a year through approved software, plus a fifth submission at year-end — the Final Declaration — that has effectively replaced the old Self Assessment return. The first of those quarterly updates covers income and expenses from 6 April to 5 July 2026 for anyone using the standard tax-year quarters, and it's due at HMRC by 7 August 2026.
That's eleven days from now.
What a Quarterly Update Actually Involves
"Quarterly tax return" gets thrown around a lot in coverage of MTD ITSA, and it's a slightly misleading phrase — a quarterly update isn't a return in the sense most Self Assessment filers understand the word. It's a running total of income and expenses for the three-month period, submitted through HMRC-recognised software rather than typed into the Government Gateway portal, and for someone who already keeps reasonably tidy digital books it can genuinely take a few minutes rather than a few hours. What it isn't is a chance to claim reliefs, adjust for personal circumstances, or finalise anything owed — that still happens once a year, in the Final Declaration, which falls due on 31 January, the date every affected taxpayer already has memorised for entirely different reasons.
Software is not optional here, and this is the part that trips people up who've spent years running a spreadsheet they understand perfectly well. Spreadsheets can still work under MTD, but only when paired with "bridging software" that formats the data for HMRC's system — a bare spreadsheet emailed to an accountant no longer satisfies the requirement on its own.
Who's Actually Caught by This
The £50,000 threshold sounds like a clean line, and in HMRC's system it technically is one, but it catches people in ways that don't always match how they think about their own finances.
- Sole traders whose 2024/25 self-employment turnover crossed £50,000 — turnover, not profit, which matters for anyone running a business with tight margins and high costs
- Landlords whose gross rental income for 2024/25 exceeded £50,000, even where mortgage interest and maintenance costs left the actual taxable profit far lower
- Anyone combining self-employment and rental income where neither source alone reaches £50,000 but the two together do
That turnover-not-profit detail is worth sitting with for a moment, because it means someone with a high-turnover, low-margin trade — a small tradesperson buying materials upfront, say, or a landlord with a heavily mortgaged portfolio — can be required to file quarterly updates despite a take-home profit that looks nothing like £50,000. There is a digital exclusion exemption for people who genuinely cannot use software for reasons such as disability, age, remoteness or religious belief, applied for directly through HMRC rather than assumed.
The other detail that trips people up runs the opposite direction: PAYE salary, dividends, a workplace or State Pension and a partner's share of partnership profit don't count towards the £50,000 at all. Someone employed full-time with a modest let-out flat on the side might glance at their total household income, see a number well past £50,000, and assume they're in scope — when in fact only the rental turnover counts, and it may sit nowhere near the threshold. The reverse also happens: a self-employed consultant earning £45,000 in fees who also lets a second property for £8,000 a year in rent combines the two and finds themselves over the line, despite neither figure looking dramatic in isolation.
None of this is about a single tidy definition of "high earner." It's a mechanical test applied to gross figures from a specific set of income types, and it rewards actually running the numbers rather than guessing from a general sense of how well the year went.
The Penalty Regime Has a Soft Landing, For Now
HMRC's points-based penalty system works the way speeding-fine points do: one point per missed quarterly update or Final Declaration deadline, and a £200 fine once you reach four points, with points expiring after twelve months of on-time filing. It sounds punitive laid out like that. The genuinely useful detail — and the one that should calm anyone reading this in a slight panic about the 7 August date — is that HMRC has confirmed no penalty points will be issued for late quarterly updates during this first year of the rollout, 2026/27. Miss the August deadline by a few days while you're still setting up software, and the practical consequence this year is closer to nothing than to a fine.
Worth doing anyway, regardless of that grace period: get into the software now rather than treating the soft landing as permission to leave it until the threshold tightens. Worth doing at the same time: check which quarter dates actually apply to you, since some businesses use calendar-month quarters instead of the standard tax-year ones, and submitting against the wrong period is its own small headache to unpick later.
Getting Set Up Before 7 August
None of this requires an accountant, though plenty of people caught in the first wave are choosing to bring one in anyway rather than learn the system under deadline pressure. If you're doing it yourself, the practical order of operations is straightforward even if the underlying admin is new.
- Check whether you're actually in scope by looking at your 2024/25 Self Assessment figures — HMRC's own online checker gives a quick answer if you're not sure
- Pick software from HMRC's published list of MTD-compatible products; most offer a free tier for sole traders with straightforward affairs, and several plug directly into a bank feed so transactions import rather than needing manual entry
- Sign up for MTD ITSA through your Government Gateway account if you haven't already been auto-enrolled — some people in scope received a letter confirming enrolment, others didn't and need to register themselves
Backfilling three months of records in the final week before a deadline is not anyone's idea of a good afternoon, but it is entirely possible if your bank statements and invoices are reasonably organised. Most of the compatible software packages let you import a CSV of transactions rather than typing each one in individually, which turns a multi-day chore into something closer to an hour of categorising.
What's Coming for Everyone Else
The £50,000 threshold is a starting point, not a settled line. It drops to £30,000 from April 2027 and to £20,000 from April 2028, which means a landlord with a single modestly-let property, or a sole trader running a part-time business alongside employed work, could find themselves in scope within the next two tax years even if this August's deadline has nothing to do with them. Checking your 2025/26 qualifying income now — before HMRC's letter arrives — costs nothing and avoids the scramble that's currently playing out for the first wave.
If this is the first you're hearing about any of it, you're not alone. But the runway here is eleven days, not the twelve months this kind of change usually gets before it actually bites.