HMRC has set a little-known deadline of August 7, 2026, for the first quarterly update under Making Tax Digital for Income Tax Self Assessment (MTD for ITSA). The deadline affects 864,000 sole traders and landlords with a combined turnover above £50,000 a year, according to HMRC and Labour Party government data.
Registration Numbers Lag Behind
Figures show that just a week after the system went live, only 250,000 people had registered. The vast majority of those – nearly 170,000 – signed up through tax agents and accountancy firms rather than as individuals. This low uptake raises concerns about compliance as the deadline approaches.
Key Dates for MTD for ITSA
August 7, 2026, marks the deadline for the first quarterly update. Subsequent deadlines include November 7, 2026, for the second quarterly update; January 31, 2027, for the last 'old style' Self Assessment return covering 2025/26; February 7, 2027, for the third quarterly update; and May 27, 2027, for the fourth quarterly update. The first year-end declaration filed directly through MTD software, covering 2026/27, is due by January 31, 2028.
Phased Introduction for Lower Thresholds
A second wave of taxpayers with lower turnover thresholds will be brought into the system in the following two years. From April 2027, those with qualifying income over £30,000 will be required to comply. The government also remains committed to extending MTD for ITSA to partnerships in the future.
What Making Tax Digital Requires
MTD for ITSA requires businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter using compatible software. HMRC states: 'Making Tax Digital (MTD) will exploit the opportunities offered by digitalisation to make it easier for everyone to get tax right. Many other countries have already done this or have digital systems in development.'
Impact on the Tax Gap
HMRC highlights that errors in handling tax affairs contribute to the tax gap – the amount of tax that is due but goes unpaid. The tax gap for Self Assessment businesses is around 18.5%, or £5 billion. According to HMRC, 'Using software to keep digital records and make regular updates has been shown to reduce the potential for error and time spent making corrections, and thus support business productivity.'
Urgent Call to Action
With less than a month until the first deadline, affected individuals are urged to register and begin using HMRC-approved software to avoid penalties. The shift to digital record-keeping aims to streamline tax compliance and reduce errors, but timely action is critical.
