The first major Making Tax Digital deadline has now passed, but hundreds of thousands of landlords and sole traders still appear to be getting to grips with the new system.
More than 436,000 landlords and sole traders successfully submitted their first Making Tax Digital for Income Tax quarterly update by the 7 August 2026 deadline, according to HMRC. More than 570,000 people had registered for the service overall.
However, HMRC previously estimated that more than 864,000 sole traders and landlords fell within the rules from April 2026, showing that a significant number had still not completed their first update by the deadline.
What is Making Tax Digital?
Making Tax Digital for Income Tax became compulsory from 6 April 2026 for landlords and sole traders with more than £50,000 of qualifying income.
Importantly for landlords, the £50,000 threshold is based on gross qualifying income before expenses and tax, rather than profit.
Income from property and self-employment is combined when deciding whether somebody passes the threshold.
Those affected must now keep digital records of their income and expenses using compatible software and provide HMRC with quarterly updates.
These quarterly submissions are not additional tax returns. Instead, they provide HMRC with summaries of the income and expenses recorded digitally during the year.
Missed the first deadline?
Landlords who failed to submit their first quarterly update by 7 August do not need to panic.
HMRC has confirmed that it will not issue penalty points for late quarterly updates during the 2026/27 tax year.
However, landlords are still required to submit any outstanding updates before they can complete their tax return for the year. Normal penalties can also still apply for late tax returns and late payment of tax.
This means the first year effectively provides landlords with some breathing space to become familiar with the new system.
That protection will not last indefinitely.
HMRC is contacting people who haven’t registered
From September 2026, HMRC is beginning to sign up people who should already be using Making Tax Digital but have not registered themselves.
This means landlords who have ignored the changes should not assume they can simply continue using the old Self Assessment system indefinitely.
The next quarterly MTD deadline is 7 November 2026, followed by:
- 7 February 2027
- 7 May 2027
The process then starts again for the following tax year.
More landlords will be dragged into MTD
The biggest issue for landlords who are currently unaffected is that the £50,000 threshold is only temporary.
From 6 April 2027, Making Tax Digital will expand to landlords and sole traders with more than £30,000 of qualifying income.
From 6 April 2028, the threshold falls again to just £20,000.
Because the calculation is based on gross income rather than profit, landlords do not necessarily need particularly large portfolios to be affected.
For example, a landlord receiving £1,700 per month in gross rent would generate £20,400 a year before expenses – potentially bringing them within the rules once the £20,000 threshold comes into force.
Penalties are coming
The penalty-free approach to quarterly submissions only applies during the first year.
From the 2027/28 tax year, missing a quarterly deadline will normally result in a penalty point.
Once a taxpayer reaches four points, HMRC can issue a £200 penalty, with further £200 penalties possible for additional missed deadlines while the taxpayer remains at the penalty threshold.
For landlords, the message is therefore increasingly clear: digital bookkeeping is becoming part of running a rental property business.
Those with larger portfolios are already inside the system, while thousands more landlords will be brought into Making Tax Digital as the income thresholds fall over the next two years.
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