The first Making Tax Digital deadline has passed. Landlords inside the regime had until 7 August 2026 to file the quarterly update covering 6 April to 5 July. On HMRC’s own published statistics, roughly 864,000 sole traders and landlords sit inside the regime on qualifying income above £50,000. That figure is the in-scope population, not a registration count. Trade press reporting, citing HMRC data, puts the number who reached the deadline unregistered in the hundreds of thousands, though the outlets differ materially on how many.
Most landlords who have noticed the regime at all have noticed one thing about it: HMRC is not charging penalties in the first year. That is half right, and the missing half is the half that costs money. Quarterly updates genuinely carry no penalty this year. Payment is treated separately and far more narrowly, and payment is where a first-year landlord can still be charged. What follows is the position as HMRC states it, checked against HMRC’s own penalties guidance on 11 August 2026.
Who is inside Making Tax Digital now
From 6 April 2026 the regime applies to individuals registered for Self Assessment whose qualifying income is more than £50,000, tested on the 2024 to 2025 tax return. Qualifying income is total turnover from self-employment and property combined, counted before expenses. A landlord with £55,000 of rent and a £48,000 mortgage bill has qualifying income of £55,000, not £7,000, and is inside. Someone with £30,000 of rent and £25,000 of trading turnover is also inside, because the two are added together.
Quarterly update deadlines are 7 August, 7 November, 7 February and 7 May. The updates are cumulative, so an error in one quarter is corrected in the next, and a quarter with no activity still needs a nil update. The final declaration at year end still does the job of a tax return.
The penalty holiday is narrower than it looks
HMRC’s guidance is unambiguous, and it is worth reading precisely. There are no penalties for missing a quarterly update deadline for the 2026 to 2027 tax year. That is the concession, and it covers the four quarterly updates only. The year-end tax return for 2026 to 2027, due 31 January 2028, is not covered: file that late and you still take a penalty point towards the four-point threshold.
It is a concession on one specific failure, in one specific year, not a waiver of the obligation. The updates must still be submitted before the year’s final declaration can be filed, so a skipped year of quarters becomes a blockage at exactly the moment tax is due. The Association of Chartered Certified Accountants takes the technical view that HMRC can still act on failures to keep digital records, and that filing nil placeholder updates to correct later is not an acceptable use of the first year.
Where late payment still bites
Late payment gets a first-year softening too, and it is worth knowing exactly how far it goes, because it is much narrower than the filing concession. HMRC gives first-year taxpayers 30 days from the payment due date to pay in full or agree a payment plan, against the 15 days that apply afterwards. Pay inside that window and there is no late payment penalty.
Miss it and the charges arrive together rather than gradually. On HMRC’s published schedule, a payment 31 days or more late attracts 3% of the tax owed at day 15 and a further 3% at day 30, so 6% lands at once. On top of that, an annual rate of 10% is charged daily on the outstanding balance from day 31 until the tax is paid, or for up to two years. From the 2027 to 2028 tax year those two 3% bands rise to 4% each. Ordinary late payment interest runs separately from the first day the payment is late, and no first-year concession covers it.
One detail catches people. The 30-day grace is granted once, so a landlord who volunteered early and has now been mandated keeps the 15-day version.
The £200 penalty and when it lands
From the 2027 to 2028 tax year the points system starts to bite on quarterly updates. Each missed submission deadline earns one point, one point per deadline regardless of how many businesses or properties you hold. At four points a £200 penalty is charged, and £200 again on every further missed deadline after that. Because it takes four missed deadlines to get there, the earliest a landlord can actually be charged is 2028, which is precisely why it is easy to ignore until it is not.
Clearing points is deliberately awkward. Below the threshold, a point drops off automatically 24 months after the deadline it relates to. Once you are at four, automatic expiry stops: you then have to file everything on time for 12 months and clear any outstanding updates and returns from the previous 24 months before the points go as a block.
Making Tax Digital thresholds keep dropping
April 2026 was the first step, not the design. The threshold falls to £30,000 of qualifying income from 6 April 2027, tested on the 2025 to 2026 tax return, and to £20,000 from 6 April 2028, tested on the 2026 to 2027 return.
Those tested years matter more than the start dates, because the £20,000 threshold is judged on income you are earning now. A landlord with even a couple of typical rental properties could be inside that band on gross rent alone. Planning on the basis that Making Tax Digital is someone else’s problem has a defined shelf life, and it is shorter than most portfolios.
Making Tax Digital for Income Tax applies to individuals, so a portfolio held in a limited company files corporation tax instead and sits outside the regime entirely. That adds a line to the ledger in our guide to why landlords buy through companies, though it does not follow that a company is right for everyone.
What this means for property investors
Two things, and they point in different directions. If you hold property personally and you are over the threshold, the work is unglamorous and small: register, get compatible software, and diarise four dates. The exposure that actually carries money in the first year is the payment date, not the filing date.
The second is a supply effect. Every increment of admin moves some marginal landlord from hold to sell, and the ones most exposed are those already squeezed by Section 24 and rising compliance costs: individuals with a few properties, self-managing, near retirement. For a buyer that is a source of stock, and stock from a tired seller tends to be tenanted stock, which is a different purchase from an empty one. Our checklist for buying tenanted property covers what changes.
You can see what that is producing in our current investment stock, or join the early access list to see off-market deals before they reach the site.