Taxpayers urged not to treat MTD ‘soft landing’ as an excuse not to comply

With the latest data showing that many taxpayers did not submit their first Making Tax Digital quarterly update in time, they are being reminded not to treat the soft-landing year as a ‘free pass’.

While more than 436,000 sole traders and landlords successfully sent their first update, just under half of those who should have did not.

HMRC is treating the first year as a soft landing period, which means that normal penalties do not apply for the 2026/27 tax year.

However, if all four quarterly updates are not submitted, then an individual will not be able to complete their year-end MTD tax return.

Making Tax Digital Responsibilities

MTD for Income Tax Self-Assessment (ITSA) came into effect from the 6^th of April 2026 and will follow another phased rollout, becoming mandatory for individuals once they reach the earnings threshold.

So, if you are a sole trader or a landlord, you will be affected from:

• 6^th April 2026, if you have an annual business or property income of more than £50,000
• April 2027, if you have an annual business or property income of more than £30,000
• April 2028, if you have an annual business or property income of more than £20,000

Responsibilities include:

• Keep digital records of your income and expenses using HMRC-compatible software.
• Submit quarterly updates to HMRC on 7^th August, 7^th November, 7^th February and 7^th These will give you an estimated tax bill as you go, which can be corrected later if needed and do not trigger payments.
• Complete a final end-of-year declaration – you’ll do this after your fourth quarterly update. This replaces the traditional self-assessment return and is where everything is checked, corrected and finalised.

MTD Soft Landing Period Does Not Remove Obligation to Comply

The Chartered Institute of Taxation (CIOT) has raised concerns that some taxpayers might be putting off sticking to the deadline date due to penalties being waived.

Ellen Milner, CIOT’s Director of Public Policy, explained, “While it’s encouraging to see many sole traders and landlords successfully filed their first quarterly updates, it is important to remember that the first year of Making Tax Digital has been designed to help taxpayers get used to the new rules, but they will still need to comply with them.

“Some taxpayers may have put off filing their first quarterly update because late filing penalties have been waived, but they cannot turn a blind eye to them forever.

“These important updates will be needed before they can file their end-of-year tax return, and failing to keep proper digital records can still result in penalties of up to £3,000.

“Taxpayers should use this period to establish good digital record-keeping habits, become familiar with MTD-compatible software and get their quarterly submissions sent to HMRC ahead of their year end tax return.”

Our What Do I Need to Know About Making Tax Digital page covers everything you need to know about the new rules and how we can help you.

For more information, don’t hesitate to get in touch with Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.