The first deadline for filing new quarterly records for income tax calculations is 7 August 2026. Making Tax Digital (MTD) rules for income tax extended to businesses that operate as sole traders in April 2026.

The new rules require businesses to use MTD-compatible software to keep digital records of income and expenses which are then sent to HMRC as quarterly updates.

HMRC point out that MTD quarterly updates do not replace the annual tax return and the tax return deadline will remain 31 January each year.

Guidance states that penalty points will not be issued for late quarterly updates during the first year of MTD for income tax. However, HMRC are clear that penalties will still apply for late self-assessment returns and late tax payments.

The latest digital tax rules follow on from MTD being rolled out for VAT returns in various phases from 2019 to 2022.

HMRC has previously said that MTD for income tax will also eventually apply to businesses that operate as partnerships, although a timeline for that has not been confirmed yet. However, there are no plans for MTD to be extended to corporation tax, which would affect businesses that operate as limited companies.