HMRC Confirms Soft-Landing Year for MTD Quarterly Update Penalties

HMRC have announced a major easing of the rules for the first year of Making Tax Digital for Income Tax. Taxpayers who enter Making Tax Digital for Income Tax in April 2026 won’t face late-submission penalties for their quarterly updates during the entire 2026–27 tax year.

That’s big news for the 850,000+ landlords and sole traders set to join the programme next year. Many will be adapting to digital record-keeping for the first time - around a quarter without the support of an accountant or tax agent - so giving them breathing room makes practical sense. A penalty-free first year helps taxpayers get used to the process and lowers the pressure while they find their feet.

The announcement signals HMRC’s effort to provide clarity and reassurance while still emphasising the need for businesses to prepare. MTD for Income Tax isn’t being delayed, and taxpayers will still need to get ready with compatible software such as Easy MTD, that provides compliance for everyone who still uses spreadsheets or non-MTD compatible accounting software.

What the soft landing doesn’t cover

Despite the welcome relaxation, the scope is limited:

• The soft landing only applies for 2026/27. Anyone brought into MTD from April 2027 onwards won’t receive the same concession.
• It covers late quarterly updates only. Penalty points will still apply for late filing of the final declaration for the 2026–27 tax year.
• It is not a late-payment concession. The new late-payment penalty system still launches in April 2026 as planned.

The takeaway? 2026–27 offers a valuable adjustment period - but the need to prepare remains. Easy MTD will provide a fast, user-friendly way for taxpayers to keep recording their digital records in a spreadsheet or software that isn't compatible with MTD, and submit quarterly updates smoothly, ensuring they’re fully ready before penalties start to bite.