New quarterly tax reporting rules could catch thousands unprepared

Sophie Patel is a Bristol-based landlord with two buy-to-lets and a small side-hustle designing websites. She’s careful, organised… and still had an “uh-oh” moment last week when her accountant asked one simple question: “What was your qualifying income in 2024–25?”

Sophie assumed she was under the radar because her profit wasn’t huge. But MTD doesn’t look at profit first—it looks at gross income from property and self-employment. If that total is over £50,000 for the 2024–25 tax year, Sophie will be mandated into the new regime from 6 April 2026 .

That means quarterly tax reporting becomes a routine part of life: keeping digital records in compatible software, sending quarterly updates, then still completing an end-of-year final declaration. And yes—Sophie is far from alone. More than 850,000 landlords and sole traders are expected to be brought in from April 2026 (Source: ATT).

By the end of this guide, you’ll know whether you’re affected, what you’ll actually have to submit, the common traps that cause penalties, and the practical steps to be ready before April 2026.

Quick answer box

• What is changing? Making Tax Digital (MTD) for Income Tax Self Assessment introduces digital record-keeping and quarterly updates sent to HMRC through compatible software (Source: GOV.UK).
  
• Who is affected first? Sole traders and landlords with qualifying income over £50,000 (gross income from self-employment + property) based on the 2024–25 tax return .
  
• When does it start? Mandation begins 6 April 2026, then expands to £30,000 from 6 April 2027, with plans for £20,000 from 6 April 2028 .
  
• What do you have to submit? Quarterly updates (income/expenses summaries), plus an end-of-year submission/final declaration—annual obligations remain .
  
• What software/records do you need? Digital records kept in MTD-compatible software (or software linked to spreadsheets) to create/store records and submit updates .
  
• Do you pay tax four times a year? No—HMRC says you won’t pay four tax bills a year; payment deadlines still centre on 31 January .
  
• What happens if you ignore it? You risk late submission penalties (points-based), and you can still be penalised for late annual returns or late payment—HMRC is relaxing penalty points for late quarterly updates for the first tax year (2026–27) for those mandated from April 2026 .
  

3) What “quarterly tax” actually means in real life

Let’s strip away the jargon. Under MTD for Income Tax, HMRC wants you to:

1. Keep digital records of your self-employment and/or property income and expenses.
   
2. Send quarterly updates to HMRC through compatible software.
   
3. Submit an end-of-year final declaration (similar in spirit to today’s Self Assessment process—finalising, adjusting, claiming reliefs, confirming totals).
   

Quarterly updates vs annual Self Assessment: what’s the difference?

• Quarterly updates are summaries sent during the tax year. Think: “Here’s what my income and allowable expenses look like so far.”
  
• The annual final declaration is where things still get properly “tax-accountant-y”: final adjustments, claims, and confirmations. Annual obligations do not disappear—they evolve.
  

The admin reality: what changes day-to-day?

This is where many people will feel it:

• Digital records become non-negotiable. If you’re currently running on a spreadsheet plus a carrier bag of receipts, you’ll need a clearer system.
  
• Bank feeds and reconciliations become your friend. Most people will rely on bank feeds to pull transactions into software. But feeds don’t “do the bookkeeping” for you—you still need to review, categorise, and fix mistakes.
  
• Quarterly rhythm replaces annual panic. You’ll be reviewing numbers four times a year (at least). That can be good (fewer surprises), but only if your records are tidy enough to trust.
  

What does one quarterly update look like?

Imagine Dan, a self-employed electrician in Leeds, mandated from 6 April 2026.

Quarter 1 (6 April to 5 July 2026) is due by 7 August 2026 if you follow standard tax-year quarters .

Dan’s records for the quarter show:

• Invoices paid: £18,000
  
• Allowable expenses (materials, fuel, tools): £6,500
  
• Profit (for the quarter): £11,500
  

A quarterly update is not a full tax return, but Dan’s software can submit a summary along the lines of:

• Income: £18,000
  
• Expenses: £6,500
  
• Net position: £11,500
  

If Dan also has a small rental property business, he may have a separate quarterly update for that property income too (many people miss this practical point until it bites). (Source: GOV.UK – MTD covers self-employment and property.)

Who is most at risk of being caught unprepared

MTD will catch people out not because they’re careless—but because their current system doesn’t match the new cadence.

Landlords with mixed income (and “profit isn’t the threshold” confusion)

Sophie Patel (Bristol) again: rental income plus self-employment income can push qualifying income over the line even when profits feel modest. Qualifying income is based on gross income from self-employment and property (before expenses), not profits .

Friction point: Sophie’s spreadsheet tracks net figures and she only totals things annually. Quarterly updates force earlier sorting and clearer categorisation (repairs vs improvements, agent fees, mortgage interest restrictions awareness, etc.).

Sole traders with seasonal income

Aamir Khan, a wedding photographer in Manchester, might earn most of his income May–September. Quarterly updates can feel awkward when one quarter is huge and another is quiet.

Friction point: if Aamir doesn’t keep up with bookkeeping during busy season, quarter-end becomes a backlog scramble—exactly the behaviour that leads to rushed errors and late submissions.

Spreadsheet users and “shoebox” record-keepers

If you’ve been getting away with:

• one annual spreadsheet update in January, or
  
• an accountant “fixing it all” once a year
  

…you’re exposed.

Friction point: spreadsheets aren’t automatically disallowed, but the workflow still needs compatible software for submission and proper digital links. In practice, most people will find purpose-built software (and bank feeds) reduces the quarterly pain.

People with multiple income streams

Think: Etsy shop + consultancy + one rental + some PAYE. Even though not all income counts as qualifying income, you still have to pull everything together for the final declaration.

Friction point: more accounts, more payment processors, more scope for missed income or duplicated expenses.

Common mistakes (and how to avoid them)

Here are the problems we expect to see most often—and the fixes.

Mistake 1: Misunderstanding thresholds and “qualifying income”

The £50,000 test is based on your qualifying income in the relevant tax year (for April 2026 mandation, that’s your 2024–25 position). 

Do this today:

• Pull your 2024–25 Self Assessment figures (or ask your accountant).
  
• Add gross self-employment income + gross property income.
  
• If it’s near £50,000, plan as if you’re in—because “near” becomes “over” easily.
  

Mistake 2: Mixing personal and business banking

This is the silent killer of quarterly workflows.

Fix: open a separate business bank account (even if you’re not incorporated). You’ll save hours in categorisation and reduce error risk.

Mistake 3: Poor categorisation

Repairs vs improvements. Mixed-use costs. Home office. Vehicle costs. If these are messy, quarterly updates become guesswork.

Fix:

• Create a short “rules list” for yourself: what goes where, what needs notes, what needs a receipt photo.
  
• If in doubt, record it and flag it for your accountant rather than forcing a category.
  

Mistake 4: Ignoring basis period/basis year changes and overlap relief 

If you’ve heard phrases like “basis period reform” and felt your eyes glaze over, you’re not alone. The simple point: some businesses have had accounting dates that didn’t align neatly with the tax year, and the rules have been changing to align profits more consistently to tax years.

Where people trip up: they assume their “year end accounts” flow cleanly into quarterly-style reporting without adjustments.

Fix: if you have a non-5-April year end (or you’ve had overlap relief in the past), get a quick professional review so your MTD setup mirrors the correct tax-year basis.

Mistake 5: Leaving software choice too late

Rushing software selection in March 2026 is a recipe for stress.

Fix: pick software early enough to:

• connect bank feeds,
  
• set categories,
  
• run one “practice quarter” internally.
  

Compliance timeline + checklist

Below is a practical timeline from now (January 2026) through the first MTD year.

Timeline: January 2026 → April 2027 (first wave)

• January–February 2026:
  
  • Confirm your 2024–25 qualifying income and whether you’re likely in the 6 April 2026 cohort .
    
  • Decide whether you’ll do bookkeeping yourself or with support.
    
• March 2026:
  
  • Choose MTD-compatible software and set up bank feeds.
    
  • Create categories and a simple document routine (receipt capture).
    
• 6 April 2026:
  
  • MTD mandatory starts for those over £50,000 qualifying income .
    
• 7 August 2026:
  
  • First standard quarterly update deadline (covering 6 April–5 July) if using tax-year quarters .
    
• 7 November 2026 / 7 February 2027 / 7 May 2027:
  
  • Next quarterly update deadlines .
    
• Tax year 2026–27 “soft landing” on quarterly penalties:
  
  • If you’re mandated from April 2026, HMRC will not apply penalty points for late quarterly updates for the first tax year (2026–27)—but late annual returns and late payment penalties still apply .
    

Checklist

Admin

• Confirm qualifying income from 2024–25 and 2025–26 (forecast if needed).
  
• Create a quarterly calendar with reminders (two weeks before each deadline).
  

Records

• Separate business bank account and (if relevant) a dedicated account for property transactions.
  
• Receipt capture routine: photograph/upload weekly, not yearly.
  
• Simple notes system for anything unusual (mileage, mixed-use items, one-off repairs).
  

Software

• Pick compatible software that fits your workflow (invoicing? mileage? landlord features?).
  
• Set up bank feeds and rules.
  
• Run a “dummy month” to test categories and reports.
  

Professional support

• Book a one-off MTD readiness review (categories, processes, year-end approach).
  
• If you have multiple income sources, confirm how many quarterly submissions you’ll need.
  

Cashflow

• Put aside a monthly tax buffer (even if payments are still due later).
  
• Review payments on account exposure and plan for spikes.
  
  

Costs & cashflow reality check

MTD isn’t just “a different way to file”. It changes the ongoing cost of compliance.

Likely cost areas

• Software subscription: monthly fee for compatible software (or spreadsheet bridging).
  
• Bookkeeping time: either your time (opportunity cost) or paid support.
  
• Accountant review: many people will want quarterly check-ins to reduce mistakes.
  
• Bank account hygiene: potentially an additional account and better payment discipline.
  
• Clean-up work: if your records are currently messy, there may be a one-off tidy-up cost.
  

Illustrative budget scenario (not a quote)

For a sole trader with straightforward transactions:

• Software: £15–£35/month (illustrative)
  
• Bookkeeping support: 1–2 hours/month if outsourced, or your own time
  
• Accountant quarterly review: £75–£200/quarter depending on complexity (illustrative)
  

For landlords with multiple properties and agents, costs can be higher because the categorisation and evidence trail matter more.

Cashflow note: HMRC’s message is clear that you won’t pay four tax bills a year; payment deadlines still centre around 31 January (and payments on account can still apply) .
But quarterly reporting can change behaviour: if you see profit building through the year, you’re less likely to be shocked in January. That’s a benefit—if your records are accurate.

FAQs

1) Do I need quarterly tax if I’m under £50,000?

Not necessarily. The first mandated group from 6 April 2026 is those with qualifying income over £50,000 .
If you’re below that, you may still be mandated later as thresholds drop (see next question), or you may choose to join voluntarily.

2) When do the thresholds change after April 2026?

They step down over time. The threshold is £30,000 from 6 April 2027, with plans for £20,000 from 6 April 2028 .

3) What counts as qualifying income?

Qualifying income is your total gross income from self-employment and property in a tax year. It’s assessed on income before expenses .

4) Does PAYE income count towards qualifying income?

No. Qualifying income is based on self-employment and property income; other Self Assessment income types don’t count towards the qualifying income test .

5) Do I still file a Self Assessment return?

Yes—annual obligations remain. You still complete an end-of-year submission/final declaration; MTD adds quarterly updates during the year .

6) What exactly are the quarterly update deadlines?

If you use standard tax-year quarters, deadlines fall on the 7th of the month after each quarter end. For example, quarter 1 (6 April–5 July) is due 7 August .

7) Are there penalties in the first year?

There’s a relaxation for late quarterly updates for the April 2026 mandated group. HMRC will not apply penalty points for late quarterly updates for the first tax year (2026–27), but penalties still apply for late annual returns and late payment .

8) How many people will this affect in 2026–27?

A lot—and it grows quickly. More than 850,000 landlords and sole traders are expected to come into MTD from April 2026, and it expands to millions as thresholds drop (Source: ATT; Financial Times).

9) Can my accountant submit this for me?

Yes, an agent can do the submissions—but you still need good records. Your accountant can support and submit via compatible systems, but your workflow must produce clean, timely data .

10) What if I’m digitally excluded?

You may be able to claim an exemption. GOV.UK recognises exemptions (including digital exclusion) and says exempt individuals must continue reporting via Self Assessment routes .

11) Do quarterly updates mean I’ll pay income tax quarterly?

No. HMRC says you won’t pay four tax bills a year; payment deadlines still centre on 31 January .

12) If I ignore MTD, what’s the real risk?

Penalties and compounding admin stress. Even with the first-year softening for quarterly penalties (for the April 2026 cohort), annual return and late payment penalties still apply—and fixing non-compliance later is usually more expensive than getting set up properly .

Final section: If you do one thing this week…

If you do one thing this week, make it certainty: find out whether April 2026 affects you.

Three quick actions that move the needle fast:

1. Calculate your qualifying income for 2024–25 (gross self-employment + gross property income). If it’s close to £50,000, act now .
   
2. Separate your banking (business and/or property). It’s the simplest way to make quarterly updates painless.
   
3. Pick your MTD workflow: software + record routine + who does what (you vs accountant). Don’t leave it to March.
   

At Bloom Financials, we can help you get ready without overcomplicating it—whether that’s a bookkeeping tidy-up, an MTD readiness check, or ongoing quarterly reporting support.

Because once quarterly tax reporting becomes your new normal, the goal isn’t perfection—it’s a reliable, repeatable process you can stick with.