Deadline approaches for first Making Tax Digital quarterly update
If you're a UK sole trader or landlord earning more than £50,000, the first Making Tax Digital (MTD) for Income Tax quarterly update is due by 7 August 2026, and that deadline is now less than two weeks away. For anyone with crypto income sitting alongside self-employment or property earnings, this is a live compliance obligation, not a future concern. Miss it in year two and you'll start collecting penalty points. Here's exactly what you need to know.
What the MTD Quarterly Update Actually Is
A lot of people are confusing the quarterly update with a tax return. It isn't one. The quarterly update is a short digital summary of your income and expenses for a three-month period, sent directly to HMRC through compatible software. HMRC describes the process as taking minutes, and early filers are backing that up.
What the update covers
The first quarterly period runs from 6 April 2026 to 5 July 2026 for most customers. If you opted for calendar-quarter reporting, your first period ran from 1 April to 30 June 2026. Either way, the submission deadline for everyone is the same: 7 August 2026.
The update captures your trading or property income and the allowable expenses you incurred during those three months. It doesn't calculate your final tax bill and it doesn't replace your Self Assessment return, which remains due by 31 January 2027. What it does do is give you and HMRC a rolling picture of your financial position, and it generates an in-software estimate of your tax liability so you can budget ahead.
What the update does not replace
Your annual Self Assessment tax return still stands. You'll still file that return and pay any tax owed by 31 January 2027. The quarterly updates are an additional layer of digital record-keeping and reporting on top of the existing self-assessment process, not a replacement for it.
Who Is in Scope Right Now
MTD for Income Tax became mandatory from April 2026 for sole traders and landlords whose qualifying income exceeds £50,000. HMRC has confirmed that more than 864,000 people fall into this first wave.
The rollout timetable beyond 2026
The income threshold drops in subsequent years. From April 2027, the requirement extends to those earning more than £30,000. From April 2028, it widens again to cover those earning more than £20,000. If you're below the £50,000 mark today, your MTD obligations are coming, just not yet.
Exemptions do exist, including for people who are digitally excluded. Full details are on GOV.UK. If you think you might qualify for an exemption, check now rather than assuming.
Why Crypto Earners Need to Pay Attention
If your crypto activity generates income that falls under Income Tax rather than Capital Gains Tax, it likely forms part of the qualifying income figure that determines whether you're in scope. Mining rewards, staking income, and crypto received as payment for goods or services can all be treated as trading or miscellaneous income by HMRC, depending on the facts of your situation. That income feeds into your total qualifying income threshold.
Crypto income and the quarterly update
If your crypto-related income is part of a sole trade or forms miscellaneous income alongside self-employment earnings, it needs to be reflected in your quarterly figures. Getting your crypto income categorised correctly matters here because an error at the quarterly stage can compound by the time your annual return is filed. Using a reliable crypto tax calculator to convert crypto transactions into sterling figures before each quarterly submission period closes is the practical way to stay on top of this.
For a broader look at how HMRC treats crypto gains and income across different asset types, see our piece on how HMRC is tracking crypto gains in official UK tax statistics.
Capital gains are separate
Crypto disposals, selling, swapping, spending, or gifting tokens are generally Capital Gains Tax events, not Income Tax ones. Those don't flow through the MTD quarterly update process. They still need to be reported, but through the Capital Gains section of your Self Assessment return. The quarterly update is an Income Tax mechanism.
How to Submit Before the Deadline
You must use HMRC-recognised compatible software to submit a quarterly update. There is no manual workaround. A full list of compatible software is available on GOV.UK.
If you haven't signed up yet
HMRC is clear that you can still sign up now. Go to GOV.UK and search for 'Making Tax Digital for Income Tax'. If you use an accountant or tax agent, they can sign you up on your behalf, and they can also submit the quarterly update for you.
Some compatible software includes a digital support tool that gives you tailored feedback before you hit submit, flagging potential errors so you can correct them in advance. You remain legally responsible for the accuracy of what's submitted, so that pre-submission check is worth using.
What happens after you submit
Once the update is filed, you'll see an in-software estimate of your cumulative tax position for the year so far. Early adopters are finding this particularly useful for cash-flow planning, knowing your approximate tax liability after just one quarter means you can set money aside rather than being caught out in January.
Penalties: Lenient Now, Stricter From Year Two
HMRC has confirmed that no penalty points will be issued for late quarterly updates during the first year of MTD for Income Tax. That grace period is real, but it doesn't mean the deadline is irrelevant. The submission obligation is still a legal requirement in year one. Penalties for late Self Assessment returns and late tax payments apply as normal throughout.
How the points system works from April 2027
From the second year of MTD for Income Tax onwards, a points-based penalty system kicks in. Miss a quarterly deadline and you receive one penalty point. Accumulate four points and a fixed £200 penalty is charged. Points expire after a period of compliance. The structure is borrowed from driving licence penalty points, a consistent pattern of missing deadlines carries a financial cost, but a single slip won't automatically result in a fine.
Building the habit of quarterly submission now, while penalties aren't yet biting, is the sensible approach. By the time the points system is live from April 2027, the process should feel routine.
Accounting Implications for Sole Traders with Crypto Income
MTD for Income Tax introduces a real-time bookkeeping discipline that many sole traders aren't used to. For those with crypto income, the quarterly cadence creates a practical challenge: you need sterling valuations for every crypto receipt within the relevant quarter, not just at year-end.
Record-keeping that supports quarterly reporting
HMRC's position on crypto record-keeping requires you to hold the date of each transaction, the type of token, the number of tokens received or disposed of, and the sterling value at the date of the transaction. Under MTD, you'll need those records organised by quarter rather than just by tax year. That's a shift in process for anyone who has historically pulled their records together in January.
A crypto tax calculator that integrates with your MTD-compatible software, or that can export clean income figures by period, reduces the manual workload significantly. You can then focus on reviewing the output rather than reconstructing transactions from exchange records under time pressure.
For a step-by-step walkthrough of MTD obligations for crypto holders specifically, see our full guide to MTD for Income Tax and crypto.
Frequently Asked Questions
Do I include crypto gains in my MTD quarterly update?
No. Crypto disposals (selling, swapping, spending, or gifting tokens) are Capital Gains Tax events and are reported through your annual Self Assessment return, not through the MTD quarterly update. The quarterly update covers Income Tax items: trading income, property income, and expenses. Crypto income, such as mining rewards or staking income treated as income, does belong in the quarterly update if it forms part of your qualifying trade or income stream.
What if I miss the 7 August 2026 deadline?
HMRC has confirmed that no penalty points will be issued for late quarterly updates in the first year of MTD for Income Tax. However, the legal obligation to submit still exists. You should file as soon as possible. Penalties for late tax payments and late Self Assessment returns continue to apply as normal.
I earn above £50,000 from self-employment and also receive crypto staking rewards. Does the crypto income affect my MTD threshold?
Possibly. If HMRC treats your staking rewards as miscellaneous income or trading income, they can contribute to your qualifying income total. If that total pushes you over the relevant threshold, you're in scope. You should confirm the tax treatment of your specific staking activity with a qualified tax adviser, as HMRC's categorisation depends on the facts of each case.
Can I use any accounting software or does it have to be MTD-recognised?
It must be HMRC-recognised MTD-compatible software. You cannot submit a quarterly update through HMRC's basic online portal or by post. A list of compatible software is published on GOV.UK. Check that your existing software is on that list before the deadline.
Will MTD affect how I report crypto capital gains?
Not directly. Capital Gains Tax reporting for crypto disposals remains part of your annual Self Assessment tax return. MTD for Income Tax does not change that process. What MTD does change is how your income (including any crypto income treated as such) is tracked and reported throughout the year, which may affect your overall tax position and the estimate you see in your software after each quarterly submission.
Source: GOV.UK / HMRC