The first update is due by 7 August 2026. For those already in scope, this means income and expenses from the start of the tax year must be kept in compatible software and submitted to HMRC as a quarterly update.
The change applies from 6 April 2026 to sole traders and landlords with qualifying income of more than £50,000 from self-employment, property income, or both. HMRC said earlier this year that more than 854,000 taxpayers were affected in the first wave. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028.
Affinia, the accountancy firm with offices across the East, warned that some sole traders and landlords are still treating MTD as an annual tax return issue. That could create problems later, even though HMRC will not apply penalty points for late quarterly updates in 2026/27.
Rob Thomson, Head of Tax at Affinia, said: “Many small businesses and landlords are focused on the final tax return, but MTD is not an annual filing change alone. The quarterly updates are the foundations of the final declaration. If those are missed or left until later, taxpayers may face a much more stressful and time-consuming process than they expect.
“The first year may feel like a soft landing because penalty points will not apply to late quarterly updates in 2026/27, but that does not make MTD optional. This is the year to get digital records, software and quarterly routines working properly.”
One common misunderstanding is the way income is counted. A landlord or sole trader may be caught even if one source of income looks modest on its own, because HMRC looks at combined gross income from self-employment and property before expenses.
Mr Thomson said: “This is not only about sole traders with high turnover. Someone with £40,000 of trading income and £12,000 of rental income will be within scope, even if neither income stream looks particularly large in isolation. Many people simply do not realise they are affected. The biggest cost risk is leaving it too late and having to reconstruct records under pressure.”
Affinia said cost concerns are also causing delays. Some taxpayers assume MTD compliance will require expensive advisory support, although support can start from £100 plus VAT per quarter, with software set-up from a one-off cost of around £90 plus VAT.
For local tradespeople, consultants, freelancers and landlords, the practical question is now simple: check whether combined qualifying income is above the threshold, make sure digital records are being kept, and send the first quarterly update by 7 August.
