MTD for Income Tax 2026: What UK Small Businesses Need to Do After the First Quarterly Update

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The first quarterly update under Making Tax Digital for Income Tax has now passed. For many sole traders, landlords and owner-managed businesses, the main question is no longer whether MTD is coming. It is how to make the next submission more organised, accurate and less stressful.

This guide explains who is affected, what the first update means, what the 2026/27 penalty easement does and does not cover, and how to prepare for the next deadline.

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Who is affected by MTD for Income Tax?

MTD for Income Tax applies to individuals carrying on relevant trading or property businesses. It does not apply to a limited company’s Corporation Tax obligations.

From 6 April 2026, the first group affected generally includes sole traders and landlords with more than £50,000 of qualifying gross income, based on the relevant earlier tax return.

The important word is gross. HMRC looks at income before expenses, not your final profit. Relevant income may also need to be considered together where an individual has more than one trading or property activity.

The thresholds are expected to widen over time:

• More than £50,000 of qualifying income: first mandatory phase from April 2026
• More than £30,000: expected to come into scope from April 2027
• More than £20,000: expected to come into scope from April 2028

You may also have a separate exemption or special circumstance, so do not rely on the income threshold alone if your affairs involve overseas income, trusts, complex property arrangements or digital exclusion.

MTD and limited companies are separate

A limited company does not submit its Corporation Tax return through MTD for Income Tax. Its company accounts, Corporation Tax return, payroll and Companies House obligations remain separate.

However, the owner or director of a limited company could still be personally affected if they also have:

• A sole-trader business
• Rental or property income above the relevant threshold
• Another relevant personal trading activity

Salary and dividends alone do not make a limited company subject to MTD for Income Tax. They may still need to be reported through personal Self Assessment, but that is different from the company’s Corporation Tax compliance.

If your main requirement is company accounts, tax and payroll, you can learn more about finding a limited company accountant.

What did the first quarterly update involve?

The first standard tax-year quarter ran from 6 April to 5 July 2026. The deadline for submitting the update was 7 August 2026.

Some taxpayers use calendar quarters instead. For them, the first period generally ran from 1 April to 30 June, but the deadline was also 7 August.

A quarterly update is not the same as a tax return. It is a summary of business or property income and expenses submitted through compatible software.

Digital records should normally capture core information such as:

• The date of each transaction
• The amount
• A description of the transaction
• Whether it relates to income or expenditure
• The relevant business or property activity

The quarterly update does not finalise your tax liability. You will still need to complete the end-of-year process, report other relevant income and reliefs, and pay any tax due by the usual annual deadlines.

What is the next MTD deadline?

For the standard tax-year cycle, the next quarterly period runs from 6 July to 5 October 2026.

The next quarterly update deadline is:

7 November 2026

The following deadlines are expected to be:

• 7 February 2027 for the quarter ending 5 January 2027
• 7 May 2027 for the quarter ending 5 April 2027
• 31 January 2028 for the 2026/27 end-of-year MTD tax return and finalisation process

You can check the first-quarter deadline in HMRC’s published deadline reference.

Do not treat 7 November as a date to start gathering records. The strongest workflow is to update your records weekly or monthly, then use the final days of the quarter to review and reconcile them.

What does the 2026/27 penalty easement mean?

HMRC has introduced a first-year easement for quarterly updates.

For the 2026/27 tax year, no penalty points will generally be issued for late MTD quarterly updates. This means that a late quarterly update may not create a penalty point during the first year of mandatory reporting.

That is helpful, but it is not a cancellation of the rules.

The easement does not mean that:

• Digital records are optional
• Quarterly updates can be ignored
• Software does not need to be compatible
• The final end-of-year declaration can be filed late
• Tax payments can be made late without consequences
• Inaccurate records are acceptable
• You can wait until 2027 to create a workable process

From 2027/28, the points-based regime is expected to apply to late quarterly updates. Generally, a late submission can result in one penalty point. Once the relevant threshold is reached, a fixed financial penalty can apply.

The sensible approach is to use 2026/27 as a bedding-in year, not a year to postpone preparation. Businesses that build good habits now will be in a stronger position when the easement ends.

A practical readiness checklist for the next update

Use this checklist before 7 November:

1. Confirm whether you are in scope
   Check your qualifying gross income, business activities and any possible exemptions.

2. Separate personal and company records
   Do not mix limited-company transactions with personal sole-trader or property records.

3. Use compatible software
   Confirm that your accounting software can keep digital records and submit MTD updates.

4. Capture transactions regularly
   Set a weekly or monthly routine for income, expenses, receipts and bank feeds.

5. Review unusual transactions
   Check private use, mixed-use costs, finance payments, asset purchases and property expenses carefully.

6. Reconcile your bank account
   Missing or duplicated transactions can distort the quarterly figures.

7. Keep supporting evidence
   Store invoices, receipts and explanations in a consistent digital filing system.

8. Check the correct quarter
   Make sure your records follow either the standard tax-year cycle or the calendar-quarter election you are using.

9. Review the update before submission
   A quarterly update is not a final tax return, but the information should still be a reasonable and well-supported summary.

10. Plan for the annual process
    Keep information about other income, reliefs and adjustments ready for the end-of-year declaration.

Questions to ask about your software and workflow

Before choosing or changing software, ask:

• Can it submit MTD for Income Tax updates directly?
• Can it separate more than one business or property activity?
• Can it connect to your business bank account?
• Can you upload and retain digital receipts?
• Can your accountant access the records securely?
• Does it allow corrections and clear audit trails?
• Can it show an estimated tax position without treating that estimate as final?
• What happens if your bank feed stops working?
• Can your records be exported if you change software?

Software is only part of the solution. A reliable process matters just as much. If sales invoices are issued in one system, expenses are kept in email folders and bank transactions are reviewed only once a year, quarterly reporting is likely to become difficult.

For more context on budgeting for support, see our guide to accountant costs in the UK.

When should you speak to an accountant?

You may benefit from professional help if:

• You missed the first quarterly update
• You have both a limited company and personal trading income
• You are unsure whether gross income exceeds the threshold
• You have rental income or several properties
• You use more than one bank account or payment platform
• You are unsure which expenses are allowable
• You need to choose MTD-compatible software
• Your records are incomplete or mostly paper-based
• You want someone to review or submit each quarterly update
• You need help with the annual Self Assessment or final declaration

Searches for “accountant near me” often bring up a wide range of firms. Look for someone who understands your business model, software and personal tax position, rather than choosing only on location.

Accountant Search provides a curated way to find an accountant by sharing your requirements and allowing suitable professionals to be matched to you.

Self-Assessment tick-box: If you have personal trading, property or other taxable income to report, tick the Self Assessment support box when completing the enquiry. Include the words “MTD for Income Tax” in your notes so the matched accountant understands what you need.

Get help before the 7 November deadline

The first quarterly update has shown that MTD is manageable when records are kept consistently. It becomes harder when transactions are missing, business and personal spending are mixed, or software is chosen without checking how it handles MTD submissions.

If you are looking for accountants for small business, a business accountant UK-wide, or small business tax services, complete our SA registration form. Tell us whether you are a sole trader, landlord, company director or owner-managed business, and explain what happened with your first quarterly update.

We can then use your details to help match you with an appropriate accountant or tax professional.

Written by Jessica for Accountant Search. This article is general information and is not a substitute for advice about your circumstances.