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The 7 August deadline at a glance
More than 864,000 sole traders and landlords are in the first mandatory phase of Making Tax Digital for Income Tax, according to HM Revenue & Customs (HMRC). Their first quarterly update is due by 7 August 2026. For most people, it covers 6 April to 5 July 2026. Those using calendar update periods will cover 1 April to 30 June instead.¹
The update is a summary of business income and expenses sent through compatible software. It is not a tax return and it does not replace the annual Self Assessment process. You will still need to submit your tax return and pay the tax due by the usual deadline.¹
This article gives general information, not tax or accounting advice. If you are unsure about your position, use HMRC's official checker or speak to your accountant or tax adviser.
Check whether Making Tax Digital applies to you
The 7 August deadline applies to the first mandatory group: sole traders and landlords whose 2024 to 2025 Self Assessment return showed qualifying income of more than £50,000. Qualifying income is the total turnover from self-employment and property before expenses, rather than profit.²
The rules are being introduced in stages. People with qualifying income of more than £30,000 in the 2025 to 2026 tax year are due to start from 6 April 2027. The threshold then falls to more than £20,000 for the 2026 to 2027 tax year, with that group due to start from 6 April 2028.¹
Do not assume that receiving no letter means the rules cannot apply. HMRC says it is still the taxpayer's responsibility to check. Its online tool can confirm when you may need to start and whether an exemption might be relevant.² Partnerships have a separate future timetable, while limited companies do not fall into this first Income Tax cohort.
What the first quarterly update contains
Your compatible software adds together the digital records for each business and sends totals for the income and expense categories you have used. HMRC does not receive each individual receipt, invoice or transaction record with the quarterly update, although you still need to keep the supporting records required for Self Assessment.³
The totals are cumulative. The first standard update covers 6 April to 5 July. The second will cover 6 April to 5 October, rather than only the three months since the first submission. This structure allows corrected records to flow into the next cumulative update without resending each earlier period separately.³
If you run more than one sole-trader business, HMRC requires separate digital records and a separate quarterly update for each one. A person who works as an electrician and also teaches driving, for example, would report those businesses separately.⁴
You must also send an update when there was no income or expenditure during the latest period. The software uses the empty records to tell HMRC that there was no activity.³
A practical checklist before you submit
First, confirm your scope. Check the qualifying income on the relevant tax return and use HMRC's checker if anything is unclear. This is especially important when you have both property and self-employment income, because HMRC considers the total qualifying income from those sources.²
Next, confirm that you have signed up and authorised your software to communicate with HMRC. Compatible software needs to create or connect to digital records, send quarterly updates and support the eventual tax return. HMRC provides a software finder and says every listed product has been through its recognition process, although HMRC does not recommend a particular provider.⁵
Bring the underlying records up to date before relying on the summary. Each digital income or expense record needs an amount, a date and the appropriate category. If you signed up after the start of the tax year, HMRC says you need to catch up from the start of the relevant period.⁴
Then reconcile the money received with the records that explain it. Compare completed sales or invoices with payment-provider data, bank entries and the accounting record. Our guide to payment reconciliation for small businesses sets out a repeatable process. This check will not decide the tax treatment of a transaction, but it can expose duplicated entries, missing income, timing differences and payments attached to the wrong invoice before those records feed into the update.
Finally, review the reporting period before sending. Businesses whose accounting period ends on 31 March may prefer calendar update periods, but that choice needs to be made in the software before the first update is submitted. Once the first update has gone, the period cannot be changed for that tax year.³
Where payment records can reduce the admin
Making Tax Digital increases the value of a clear trail from customer payment to invoice, bank entry and accounts. Stable invoice references, accurate completion statuses and regular reconciliation make it easier to understand what each receipt represents. They also make exceptions visible while the transaction is still recent.
An accounting integration can help move reliable data between systems, provided its role is understood. Wonderful's Xero integration can create draft invoices from payments and mark them paid when the customer completes the payment.⁶ It does not submit Making Tax Digital updates or make a business compliant by itself. You still need compatible tax software and a process that meets HMRC's requirements.
Settlement speed is a separate question. Faster access to customer funds can improve cash visibility, as our guide to Pay by Bank instant settlement explains. The quarterly update still depends on accurate records, even when the money reaches the bank quickly.
If you miss the 7 August deadline
HMRC will not apply penalty points for late quarterly updates during the 2026 to 2027 tax year. That first-year treatment gives businesses time to adjust, but it does not remove the requirement to send the updates. You must complete them before you can submit the annual tax return. Penalty points can still apply to a late tax return, and late payment consequences remain separate.³
If you are not ready, avoid guessing or forcing uncertain entries into a category. Bring the records up to date, ask your software provider about technical problems and speak to a tax adviser about any accounting judgement. HMRC's guidance also sets out routes for support and exemptions where a person's circumstances qualify.
Put the next dates in your calendar
After 7 August, the next quarterly update deadlines are 7 November 2026, 7 February 2027 and 7 May 2027. Each update builds on the records from the start of the tax year to the end of that reporting period.³
The most useful action now is to make sure the first submission is built on records you can trace. Confirm that the rules apply, authorise compatible software, match the income to the business records and review the totals before sending. A clean first quarter gives you a better starting point for every cumulative update that follows.
Footnotes
- HM Revenue & Customs, deadline, cohort and phased introduction of Making Tax Digital for Income Tax. Deadline approaches for first Making Tax Digital quarterly update
- HM Revenue & Customs, qualifying income, scope and the official checker. Find out if and when you need to use Making Tax Digital for Income Tax
- HM Revenue & Customs, quarterly update contents, periods, deadlines and penalty treatment. Send quarterly updates
- HM Revenue & Customs, digital record requirements and separate records for multiple businesses. Create digital records
- HM Revenue & Customs, compatible software requirements and recognition process. Find software that works with Making Tax Digital for Income Tax
- Wonderful, current features of the Wonderful and Xero connection. Pay by Bank and Xero: auto-generated invoices
