Missed an MTD Quarterly Update?

What Sole Traders and Landlords Need to Know

If you missed the deadline, do not panic. HMRC has introduced a first-year soft landing, which means you will not receive a penalty point for submitting a 2026/27 quarterly update late.

However, this does not mean the quarterly updates are optional. You still need to bring your digital records up to date and submit the required information.

What is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax, commonly referred to as MTD for Income Tax, changes how certain sole traders and landlords maintain and submit their financial information.

From 6 April 2026, the rules became mandatory for sole traders and landlords whose total qualifying income from self-employment and property exceeded £50,000.

Qualifying income is calculated before expenses are deducted. This means it is based on your combined gross self-employment and property income rather than your taxable profit.

Those affected must:

• Maintain digital records of their business or property income and expenses.
• Use HMRC-compatible software.
• Send quarterly summaries to HMRC.
• Complete and submit a year-end Income Tax return.
• Pay the tax due by the normal payment deadline.

Quarterly updates are summaries of the income and expenses recorded in your software. They are not separate tax returns and do not replace the annual Income Tax return.

What happens if you miss a quarterly update?

HMRC will not issue penalty points for late quarterly updates during the 2026/27 tax year. This gives sole traders and landlords time to become familiar with digital record keeping and quarterly reporting.

The soft landing applies to all four quarterly updates for the 2026/27 tax year.

This means you will not receive a penalty point if you miss one or more of the following deadlines:

• 7 August 2026
• 7 November 2026
• 7 February 2027
• 7 May 2027

Although penalty points will not be issued for these quarterly updates, you must still submit the required information. You will need to send all the relevant quarterly updates before you can submit your year-end tax return.

Ignoring a missed update could therefore create a larger backlog and make completing your tax return more difficult.

What does the soft landing cover?

The first-year soft landing only applies to late quarterly updates for the 2026/27 tax year.

It does not provide protection against:

• A late year-end Income Tax return.
• Late payment of your tax bill.
• Interest charged on overdue tax.
• Other failures to meet your tax obligations.

Your quarterly updates do not replace your annual tax return. For the 2026/27 tax year, the deadline for submitting your return and paying the tax due remains 31 January 2028.

It is therefore important to distinguish between being late with a quarterly update and being late with your tax return or tax payment.

What should you do if you missed the 7 August deadline?

If you missed your first quarterly update, take the following steps as soon as possible.

1. Bring your digital records up to date

Make sure all relevant income and expenses have been entered into your compatible accounting or bookkeeping software.

For most people using standard quarterly periods, the first update covers the period from 6 April to 5 July 2026.

Check that you have included:

• Sales invoices and other business income.
• Property rental income, where applicable.
• Purchases and business expenses.
• Bank charges and finance costs.
• Mileage or travel expenses.
• Any other allowable business transactions.
• Supporting receipts, invoices and financial records.

Your records should be complete, accurate and supported by appropriate documentation.

2. Reconcile your bank transactions

Compare the transactions recorded in your software with your business bank account.

Regular bank reconciliation can help identify:

• Missing income.
• Duplicate entries.
• Expenses entered incorrectly.
• Personal transactions recorded as business expenses.
• Payments that have not been matched to invoices.

Correcting these issues throughout the year is much easier than trying to resolve them shortly before the tax return deadline.

3. Submit the outstanding information

Once your records are up to date, submit the required quarterly information through your MTD-compatible software.

Quarterly updates are cumulative. Each update covers the period from the beginning of the tax year to the end of the relevant reporting period. This allows corrections made to your digital records to be reflected in a later update without resubmitting every earlier figure separately.

Your software provider or bookkeeper should be able to explain how an overdue update is handled within the system you use.

4. Prepare for the next deadline

After dealing with the missed update, set reminders for the remaining quarterly deadlines.

Do not wait until the submission date to organise your bookkeeping. Aim to review and reconcile your records at least monthly so that submitting an update becomes a straightforward task rather than a last-minute rush.

How will the penalty system work after 2026/27?

From the 2027/28 tax year, late quarterly updates will be included in HMRC’s points-based penalty system.

You will normally receive one penalty point each time you miss a quarterly update or relevant tax return deadline. Once you reach the four-point threshold, HMRC can issue a £200 penalty. A further £200 penalty can then be charged for every subsequent missed deadline while you remain at the threshold.

Paying a penalty does not, by itself, remove the accumulated points. You will need to meet HMRC’s compliance requirements and submit outstanding returns before your record can be cleared.

The 2026/27 soft landing should therefore be treated as an opportunity to establish effective digital bookkeeping procedures before the full penalty rules apply.

How can you make MTD easier to manage?

The most effective way to manage Making Tax Digital is to maintain accurate records throughout the year.

Practical steps include:

• Using a separate business bank account.
• Recording income and expenses regularly.
• Keeping digital copies of receipts and invoices.
• Reconciling your bank account each month.
• Checking that expenses have been placed in the correct categories.
• Reviewing outstanding customer and supplier balances.
• Setting calendar reminders ahead of every quarterly deadline.
• Asking for help before a backlog becomes unmanageable.

Good bookkeeping does more than help you meet HMRC requirements. It can also provide a clearer understanding of your cashflow, profitability, outstanding payments and overall financial position.

Can you appeal an MTD penalty?

If you receive a penalty point or financial penalty and believe you had a reasonable excuse for missing the deadline, you may be able to appeal.

Examples could include a serious illness, bereavement, an unexpected hospital stay or a significant software failure. Whether HMRC accepts an appeal will depend on the individual circumstances and the actions you took once the problem was resolved.

Keep evidence of the circumstances that caused the delay and act promptly when you receive a penalty notice.

Do not wait for the next deadline

Missing a quarterly update during the 2026/27 tax year will not automatically result in a penalty point, but the submission requirement has not disappeared.

Leaving your records unresolved could prevent you from completing your year-end return and may make it more difficult to meet future deadlines.

This first-year soft landing gives affected sole traders and landlords an opportunity to correct any problems, improve their bookkeeping processes and become comfortable with digital reporting before the full penalty system takes effect.

Need help getting your bookkeeping and digital records back on track?

AA Compliance Compass Ltd provides practical bookkeeping, cashflow and business financial support to sole traders, start-ups and SMEs.

Whether you have missed a quarterly update, fallen behind with your bookkeeping or need help preparing for Making Tax Digital, we can help you organise your records and establish a manageable process for the future.

Purchase My Sole Traders Bookkeeping and MTD Guide

or contact Anne to discuss your requirements:

Email: anne.ashman@compliance-compass.co.uk
Website: www.compliance-compass.co.uk

Call to action: Do not wait until the next deadline. Get in touch today to arrange an initial discussion and find out how AA Compliance Compass Ltd can help you bring your records up to date.

Disclaimer: This article provides general information only and does not constitute tax, accounting or legal advice. HMRC requirements can change, and individual circumstances vary. You should check the latest GOV.UK guidance or seek advice from an appropriately qualified tax professional.