MTD: Slow Start to Quarterly Tax Returns as Mandatory Next Phase Sign Up Begins

Over 436,000 taxpayers file first MTD quarterly update — far below HMRC expectations

HMRC has confirmed that more than 436,000 sole traders and landlords have successfully submitted their first Making Tax Digital (MTD) quarterly update, following the first filing deadline on 7 August 2026.

This figure is significantly lower than anticipated. HMRC had previously estimated that around 864,000 taxpayers would be required to join MTD from 6 April 2026, yet only 570,000 have signed up to the service so far.

Who is required to use MTD?

Since April 2026, sole traders and landlords earning more than £50,000 have been legally required to:

• keep digital records

• send quarterly updates through HMRC‑recognised software

From 6 April 2027, the requirement will extend to those earning more than £30,000.

Quarterly updates are short digital summaries and do not replace the self‑assessment tax return. The 31 January deadline for tax returns remains unchanged.

First quarterly update period and deadline

For most taxpayers, the first update period ran:

• 6 April 2026 – 5 July 2026

• Deadline: 7 August 2026

Some taxpayers using calendar quarters submitted for:

• 1 April – 30 June 2026

• Deadline: 7 August 2026

Taxpayers who missed the deadline can still file now. There are no penalty points for late quarterly updates in 2026/27, although penalties still apply for late tax returns and late payments.

HMRC to begin automatically signing up taxpayers from September 2026

In a notable shift, HMRC has announced that it will begin signing up taxpayers automatically from September 2026 if they should already be using MTD for the 2026/27 tax year but have not yet done so.

This staged rollout will continue over the coming months.

Taxpayers can avoid being automatically enrolled by signing up voluntarily now via GOV.UK. HMRC emphasises that signing up early allows individuals to:

• ensure their details are correct

• prepare at their own pace

• avoid waiting for HMRC to initiate the process

New guidance will be published in late August explaining what taxpayers should do if they receive a letter about being signed up.

Why HMRC is moving early — and the risks

HMRC is keen to reinforce that MTD is not optional, even though quarterly update penalties do not apply this year. Early sign‑ups give taxpayers more time to adjust before filing their first MTD‑compatible tax return.

However, the move carries risks. Taxpayers who are not required to join until 2027 or 2028 may be less motivated to sign up voluntarily if they expect HMRC to do it for them later.

Quarterly updates: cumulative and catch‑up friendly

Because quarterly updates are cumulative, taxpayers do not need to backfile missing updates for 2026/27. A later update can bring the record up to date.

But quarterly updates are not optional. Anyone signed up to MTD must file their 2026/27 tax return using MTD‑compatible software, which requires at least the fourth quarterly update to have been submitted.

A list of compatible software is available on GOV.UK.

Penalties from April 2027

From 6 April 2027, a points‑based penalty system will apply:

• 1 point per missed quarterly deadline

• 4 points triggers a £200 fixed penalty

• Points expire after a period of compliance

Full details are available on GOV.UK.

Exemptions

Exemptions remain available for those who are digitally excluded or otherwise unable to use MTD. Guidance is provided on GOV.UK.