Friday 7 August is the deadline for the first-ever Making Tax Digital for Income Tax (MTD for ITSA) quarterly update, and HMRC estimates hundreds of thousands of sole traders and landlords are affected. If your self-employment or property income was over £50,000 in the last tax year, you should already be filing through HMRC-recognised software rather than waiting for your usual January Self Assessment date — and if you haven’t started, tomorrow is the moment that stops being theoretical.

This is the biggest change to how self-employed people and landlords report income since Self Assessment itself launched. Instead of one annual tax return, MTD for ITSA requires four quarterly updates a year plus a final declaration, all submitted digitally through approved software rather than HMRC’s own online portal. The update due this week covers income and expenses from 6 April to 5 July 2026 — it’s a summary, not a full return, and HMRC says it takes minutes once your software is connected. The catch is getting to “connected” if you haven’t touched it yet.

Check whether you’re actually in scope

The £50,000 threshold applies to gross income from self-employment and property combined, not profit — so it catches more people than the number sounds like it should. If you’re a sole trader, a landlord with several properties, or both, and your combined qualifying income cleared £50k in the 2024-25 tax year, you’re in the first wave. If you’re unsure, HMRC’s own eligibility checker on GOV.UK is the fastest way to confirm rather than guessing and either missing a deadline or filing when you didn’t need to.

The penalties are lighter this year — but don’t bank on it staying that way

HMRC has confirmed no penalty points will be issued for missed quarterly updates in this first year, which takes the immediate pressure off if you’re late setting up. But that grace period is a one-off: from year two, a points-based system kicks in, and reaching four points triggers a £200 penalty with another £200 for every subsequent miss. Late Self Assessment returns and late payments are still penalised as normal right now. Treat this quarter as the dry run you don’t want to be doing for real next year — get the software connected and the habit formed while the stakes are low.

Get your software sorted before the next one creeps up

The real friction isn’t the filing itself, it’s picking and setting up HMRC-recognised software if you’ve never needed it before — most small landlords and sole traders have historically got by with a spreadsheet and an accountant once a year. If your bookkeeping is still manual, this is the trigger to move to proper digital record-keeping now rather than scrambling before the next quarterly deadline in November. Businesses building or buying software to handle this kind of compliance workload reliably are exactly where CoolCoding is useful — getting the technical implementation right the first time so quarterly filing becomes routine rather than a recurring fire drill.

What actually needs to go in the update

Each quarterly update is a running total of income and allowable expenses for the period, built from digital records rather than typed in from memory at deadline time. That’s the part that trips people up first time round — MTD-recognised software expects you to log transactions as they happen, or at least reconcile them regularly, not reconstruct three months of receipts the night before. If you’re still working from paper receipts or a shoebox system, this quarter is the one to finally digitise, because the software can’t produce an accurate summary from records that don’t exist yet.

The takeaway

If you’re a sole trader or landlord earning over £50k, check your MTD status today, not Friday morning. The penalty-free grace period makes this a low-risk quarter to get the process working — use it, because that safety net disappears from next year.