MTD Quarter One: How It Actually Went (and What the £30k+ Crowd Should Learn From It)
The 7 August deadline has been and gone, which means the very first quarterly update under Making Tax Digital for Income Tax is officially behind us. So how did it go? In a word: mixed.
The prepared had a much easier time of it
That's not to say early preparation made everyone immune from problems. Some who did everything right still ran into tech issues (more on that below). But it certainly stacked the odds in your favour. One client came to us for software suggestions well ahead of the deadline, got themselves set up on FreeAgent, and had their quarterly update filed within about a week. No drama, no panic, no late nights. And crucially, anyone who hit a snag early had time to sort it out - a luxury the last-minute crowd didn't have.
Plenty of others left it right until the last minute. And honestly, who can blame them? With no penalties for late quarterly updates in this first year, there wasn't much of a stick to motivate anyone. But the penalty-free period won't last. From year two, HMRC's points-based system kicks in, and missed deadlines start to add up to real money.
The numbers tell a story
More than 864,000 sole traders and landlords were within scope for this first deadline. By the week of the deadline, just over 500,000 had signed up, meaning roughly four in ten still hadn't registered.
Even more telling: a survey by Tide in the run-up to the deadline found that 22% of business owners didn't even realise the deadline was approaching. Some people genuinely didn't know they had to register at all. Signing up isn't automatic, even if you've filed Self Assessment returns for years.
The tech wasn't always ready either
It wasn't just taxpayers who had teething problems. We heard plenty of reports of software showing the wrong period dates, displaying a strange mash-up of the standard quarter (6 April to 5 July) and the calendar quarter option (1 April to 30 June), producing dates like 1 April to 5 July that don't match either. Others hit problems with the linking process itself.
One bit of reassurance
If your first update wasn't perfect, don't lose sleep over it. Quarterly updates are cumulative. Each one covers from the start of the tax year to the end of that period, not just the last three months, so anything you got wrong in Q1 can simply be corrected in your next update. Estimates and provisional figures are acceptable, and you don't need to make accounting or tax adjustments before submitting. HMRC themselves have said they're "not expecting perfection" from this first cohort.
What the quarterly update isn't is your tax return. It doesn't replace the annual filing: for 2026/27, your final declaration is still due by 31 January 2028.
If you're in the £30k+ cohort, this is your dress rehearsal
From April 2027, MTD extends to anyone earning over £30,000 from self-employment and property. Worth being clear on this one, because it catches people out: that's gross income, not profit. It's your turnover plus your rental income before any expenses come off. Plenty of people who think they're nowhere near the threshold turn out to be well over it.
If that's you, everything above is a free preview of what's coming, and the single biggest takeaway is that preparation is key. If you're unsure where to start, speak to a professional.
When it comes to choosing software, there's no one-size-fits-all. What works for your mate may not be the best fit for you. A few questions worth asking before you commit:
- If you plan to do everything yourself, can the software handle the end-of-year tax return as well as the quarterly updates? Some can't.
- If you plan to work with an accountant for the tax return, can you give them access? Some products don't allow it, which makes our job a lot harder.
- What's the support like if things go wrong? (See above: things do go wrong.)
- What happens if you switch software or cease trading? Can they store your records for the retention period HMRC requires?
Software is a tool, not an adviser
One last thing, and it's the most important. No matter how clever the software is, it's not a replacement for professional input. It doesn't know why the exact same coffee might be an allowable expense one day but not another, and it can't answer all the other "it depends" questions that need real context and judgement.
And at the end of the day, you are responsible for any errors on your return, not the software company.
Quarter one is done. Quarter two's deadline is 7 November. If this first round taught us anything, it's that a little preparation goes a very long way. And if you'd rather not go it alone, we're here to help.
Ready to get ahead of it? Book an MTD Power Hour
If you need to comply with MTD from April 2027 and want to walk into your first quarter feeling prepared rather than panicked, book one of our MTD Power Hours - £97.
In one focused session we'll cover:
- Getting you registered for MTD
- Choosing the right software for your business (not your mate's)
- Exactly what you need to do, and when
- A plan to keep on top of things quarter after quarter
And if you go on to become a monthly package client, you'll get £40 credit off your first payment.
Click here to book your Power Hour, and let's get ahead of the game.