By Jess Martin 
The first year of Making Tax Digital for Income Tax has passed with rather less disruption than the profession feared. More than 436,000 taxpayers filed a quarterly update by the opening deadline of 7 August 2026, and the second update, covering 6 April to 5 October, falls due on 7 November. For the sole traders and landlords already inside the system, a new rhythm is beginning to settle.
The people who ought to be paying closest attention, though, are the ones who have heard nothing from HMRC at all. From 6 April 2027 the qualifying income threshold drops from £50,000 to £30,000, and entry is tested against the 2025-26 self assessment return, which must be filed by 31 January 2027. The paperwork being gathered on kitchen tables this autumn will decide whether a business spends next year filing four updates or one.
The most persistent misunderstanding concerns what is actually being measured. Qualifying income is gross turnover from self employment added to gross rental income, counted before a single expense is deducted. A decorator invoicing £26,000 who also lets a flat for £9,000 a year has qualifying income of £35,000 and will be mandated from April 2027, even if taxable profit after costs and finance charges is less than half that figure. Firms providing accountancy services in Peterborough and other regional business centres see the pattern repeatedly among part-time traders and accidental landlords, who reasonably assume the threshold refers to what they take home.
What quarterly reporting actually involves
Much of the anxiety around the reform rests on a belief that four tax returns have replaced one. They have not. A quarterly update is a cumulative summary of income and expenses to date, submitted through compatible software, with no tax calculation attached and no payment due. Adjustments, reliefs, capital allowances and other income sources are still handled once a year at the final declaration stage, which replaces the familiar online return and remains due on 31 January. Payment dates have not moved.
The update deadlines are fixed at 7 August, 7 November, 7 February and 7 May. Because each submission is cumulative rather than standalone, a figure entered wrongly in the first quarter can be corrected in the second without a separate amendment. For anyone whose paperwork tends to arrive late, that is a genuine improvement on the old arrangement.
Two details that catch people out
The first is that mandation is sticky. Once a business is required to use the system it stays in, and can only leave once qualifying income has fallen below the threshold for three consecutive tax years. A trader who crosses £30,000 in 2025-26 and then deliberately scales back will still be reporting quarterly in 2029.
The second concerns penalties. There are no late submission penalties for missed quarterly updates during 2026-27, which has given the first wave a year to find its footing. On the current timetable that grace period does not repeat. Points-based penalties apply from 2027-28, with each missed deadline earning a point, a £200 charge triggered at four points and a further £200 for every miss after that. Businesses joining in April 2027 will be inside the penalty regime from their very first update.
What to do before January
Three practical steps make the transition manageable. Start by pulling the gross figures out of the 2025-26 records before the return is filed rather than after, so there is time to plan. Next, separate business and personal banking if that has not already happened, because the friction most often reported by early adopters is untangling mixed accounts four times a year instead of once. Finally, choose software early and check it against HMRC’s list of recognised products, particularly if the business currently runs on spreadsheets. Bridging software is permitted, and it works far better when the underlying spreadsheet is tidy.
Anyone who genuinely cannot use digital tools, whether through age, disability or unreliable internet access, can apply for a digital exclusion exemption. It is not granted automatically, and the application has to reach HMRC before the start date rather than after it.
The habit, not the tax
Making Tax Digital does not alter how much tax anyone pays. What it changes is the rhythm of record keeping, replacing an annual scramble with a routine. For the businesses joining in April 2027, the useful work happens now, in the months before a return is filed rather than the weeks after a letter arrives. Knowing which side of £30,000 the figures fall on is very nearly the whole of it.