The government has confirmed that Making Tax Digital (MTD) for Income Tax will begin in April 2026. The major announcement ahead of the MTD launch is the suspension of penalties for quarterly updates during the first year.
MTD Rollout Confirmed for April 2026
MTD for Income Tax will start as planned in April 2026. The first mandatory group includes individuals with qualifying self-employment and/or property income. Around 850,000 taxpayers are expected to join in this initial phase, with roughly 25% operating without a tax agent.
The early confirmation allows taxpayers and software providers to prepare for quarterly reporting and digital record-keeping. HMRC emphasised that the rollout will proceed on schedule, with no delays.
Soft Landing: Suspension of First-Year Quarterly Update Penalties
The Autumn Budget confirmed that first-year quarterly update penalties will be suspended for taxpayers joining MTD in April 2026. Missed quarterly updates will not result in penalty points during the 2026–27 tax year.
This temporary relief is designed to support taxpayers as they adjust to digital reporting and to give software providers time to onboard users efficiently.
Scope of the Penalty Suspension
There is strict clarification that the suspension applies only to quarterly update penalties. It does not cover:
Late payment penalties
The annual Self-Assessment return
Taxpayers joining MTD from April 2027 or later
Other MTD obligations, including digital record-keeping, quarterly updates and annual final declaration submissions, remain legally required.
Reason for First-Year MTD Penalties Relief
The quarterly submission penalty suspension aims to:
Help taxpayers transition to quarterly digital reporting
Support software providers in onboarding
Reduce immediate compliance pressures for the first mandated group
This decision reflects recognition of implementation challenges and the need to reduce the risk of widespread non-compliance.
Remind me: What is MTD Threshold and who are affected taxpayers?
Making Tax Digital for Income Tax applies to individuals based on their qualifying income from self-employment and/or property, with phased thresholds:
those with more than £50,000 based on their 2024–25 tax return must join from April 2026,
those with between £30,001 and £50,000 based on their 2025–26 tax return will join from April 2027,
and those with more than £20,000 based on their 2026–27 tax return will join from April 2028.
Key Takeaway
The Autumn Budget 2025 confirms that Making Tax Digital for Income Tax will begin in April 2026, with a soft landing for first-year quarterly update penalties. Taxpayers have temporary relief to adapt to digital reporting while continuing to meet essential obligations such as digital record-keeping, quarterly updates, and year-end submissions.
HMRC’s phased rollout and penalty suspension demonstrate a pragmatic approach, balancing compliance enforcement with practical support for landlords, sole traders, and software providers. Try out Rentalbux for free.