Yes, but as always, it is more nuanced. HMRC's message to taxpayers entering Making Tax Digital (MTD) for Income Tax has been reassuring. Quarterly updates do not need to be perfect. Errors can be corrected later, and the Final Declaration remains the definitive year-end submission.
For many landlords and sole traders, that sounds like permission to treat quarterly updates as rough estimates. But that is where the risk begins. Inaccurate or incomplete data submitted across four quarterly updates does not sit in isolation. It carries forward throughout the tax year and ultimately feeds into your Final Declaration. The more errors, omissions, and estimates that accumulate, the more difficult and time-consuming it becomes to produce an accurate year-end filing. What appears to be a small issue in one quarter can quickly become a larger compliance problem by the end of the year.
This article explains why HMRC's reassurance should not be mistaken for a licence to submit poor-quality data, how errors in quarterly submissions can snowball, what penalties for inaccuracies look like, and the steps landlords and sole traders should take now to stay ahead of the problem.
Key Takeaways
- HMRC's advice that Making Tax Digital quarterly updates "don't need to be perfect" is technically accurate, but treating them as rough drafts will create a data reconciliation problem at Final Declaration
- MTD for Income Tax has been mandatory for landlords and sole traders with qualifying gross income above £50,000 since 6 April 2026
- Only 35% of those required to register for MTD have done so, as of the time of writing (according to HMRC data)
- HMRC's soft landing means no penalty points for late quarterly updates in 2026/27, but late payment penalties will apply in full
- MTD expands to landlords with qualifying income above £30,000 from 6 April 2027, and above £20,000 from 6 April 2028
- RentalBux is HMRC-recognised MTD software designed for UK landlords covering domestic and foreign property, auto-splits joint ownership profits, and all other property-specific issues in a single platform
What Has HMRC Said About Making Tax Digital Quarterly Updates?
HMRC says that quarterly updates do not need to be perfect and can be corrected before the Final Declaration is submitted.
Speaking at Accountex London 2026, HMRC officials sought to reassure landlords and sole traders about the new quarterly reporting requirements and clarified that the quarterly updates were not additional tax returns, they did not determine your final tax liability, and they could be amended if errors are identified later.
Every part of that statement is technically correct. The problem is not the accuracy of HMRC's message. It is how taxpayers may interpret it.
When people hear that quarterly updates can be corrected later, they may conclude that accuracy is not important at the point of submission. Rather than keeping records fully up to date, they may rely on estimates, leave transactions uncategorised, or submit incomplete figures simply to meet the deadline.
The difficulty is that quarterly updates are not isolated submissions. They form part of a cumulative year-to-date record that carries forward throughout the tax year. As a result, small issues can build over time. A missing expense or estimated figure in one quarter can affect later submissions and gradually distort the overall picture.
By the time the Final Declaration is prepared, everything has to be reconciled back to the correct annual position. What seemed like minor shortcuts during the year can therefore become a broader year-end correction exercise.
That is the hidden risk behind HMRC's reassurance. The quarterly updates may not need to be perfect, but the underlying record still needs to be accurate when the Final Declaration is filed.
How Inaccurate Quarterly Updates Compound Into a Final Declaration Problem
Inaccurate quarterly updates turn into a Final Declaration problem because all four updates feed directly into the year-end submission and must be reconciled before the final tax position can be calculated.
The Final Declaration is the end-of-year submission under Making Tax Digital for Income Tax. It replaces the traditional Self Assessment Tax Return and is where your final allowances, adjustments, and tax liability are calculated. It must be filed by 31 January after the tax year ends.
The key point is that you cannot complete the Final Declaration without first having filed all four quarterly updates for that tax year. They are not separate from the year-end process, they form the basis of it.
If quarterly updates contain estimates, missing entries, or inconsistent figures, the year-end process is no longer a simple review. It becomes a reconciliation exercise. Each figure has to be traced back through the year, compared against actual records, and corrected where necessary before the final position can be confirmed.
For landlords with multiple properties, this can become quite complex. Rental income may vary month to month, while expenses such as repairs, mortgage interest, and letting agent fees are spread unevenly across the year. If records were not kept accurately in real time, they all need to be rebuilt later under time pressure.
What should have been a straightforward submission can therefore become a detailed reconstruction of the entire year’s records just to arrive at the correct Final Declaration.
Worked Example: How Quarterly Submissions Factor Into the Final Declaration
Scenario
A landlord owns two rental properties during the 2026/27 tax year. Throughout the year, they submit quarterly updates under Making Tax Digital for Income Tax based on the information available at the time. Some figures are estimated, and some expenses are recorded late.
By the end of the tax year, the actual financial position is as below:
- Total Rental Income = £68,000
- Allowable Expenses = £14,200
- Property Business Profit = £53,800
- Mortgage Interest Incurred = £9,600 (relieved separately as a tax reduction, not deducted from profit)
What Was Submitted During the Year
Each quarterly update is based on cumulative figures, but not all records are fully up to date when they are submitted:
- Q1 - Income and expenses partly estimated due to incomplete records
- Q2 - Improved accuracy, but some expenses still missing
- Q3 - Late-recorded costs not yet included
- Q4 - Closer to reality, but still not fully reconciled with year-end bookkeeping
Individually, each update is accepted within the system. However, collectively they do not fully reflect the final position of the business.
Reconciliation Problem
At the Final Declaration stage, the landlord is no longer simply “confirming” quarterly figures. Instead, they must rebuild the full-year position.
That process involves:
- Reviewing all rental transactions across both properties
- Identifying income or expenses that were missed or estimated during the year
- Correcting cumulative quarterly figures where they do not match actual records
- Ensuring the final income and expense totals reconcile back to £68,000 and £14,200
Only once this reconciliation is complete can the property business profit of £53,800 be confirmed.
Where Mortgage Interest Fits
After the profit is finalised, mortgage interest relief (£9,600) is applied separately as a basic rate tax reduction in the final tax calculation. It does not reduce the property profit itself, but it does reduce the overall tax liability once the profit has been determined.
What This Shows
Quarterly updates feel like small, self-contained tasks. But actually, they form a continuous record that must eventually be reconciled into a single, accurate annual position. The more estimation and delay built into those updates, the larger and more time-consuming the reconciliation becomes at the Final Declaration stage.
Does the Soft Landing Actually Protect You?
Not to the extent that you may think. The soft landing only delays full enforcement of the penalty system during the early phase of Making Tax Digital for Income Tax. It reduces short-term pressure during adoption but does not remove compliance obligations or long-term penalty exposure.
What the Soft Landing Covers
What the Soft Landing Doesn't Cover
The Penalty Timeline Once the Soft Landing Ends
Quarterly Deadline | Do Penalty Points Apply |
|---|---|
7 August 2026 (Q1 2026/27) | No |
7 November 2026 (Q2 2026/27) | No |
7 February 2027 (Q3 2026/27) | No |
7 May 2027 (Q4 2026/27) | No |
7 August 2027 (Q1 2027/28) | Yes. This is the first penalised deadline |
7 November 2027 (Q2 2027/28) | Yes |
7 February 2028 (Q3 2027/28) | Yes |
7 May 2028 (Q4 2027/28) | Yes |
Under HMRC’s points-based system, late submissions can result in penalty points being accumulated. Once a defined threshold is reached, a financial penalty is charged (commonly £200 under the current framework), with further penalties possible for continued non-compliance. Points are reset after a period of sustained compliance with submission requirements.
7 August 2027 is 14 months away. That is not a distant deadline.
What Should You Do If You Have Not Yet Registered for Making Tax Digital?
Registration remains open. If your qualifying gross income, i.e., combined property and self-employment turnover (before expenses) exceeded £50,000 in the 2024/25 tax year, you are required to register now.
To register, you’ll need to use the same user ID and password you got when you registered for Self Assessment. Please note that you may be asked to provide additional proof of your identity.
Once registered, you will need two things in place before your first quarterly update is due on 7 August 2026.
- Compatible MTD Software - Quarterly updates cannot be submitted directly through HMRC's website. They must go through HMRC-recognised software. UK Property Accountants’ very own RentalBux software is built specifically for UK landlords, handles property issues like domestic and foreign property, joint ownership profit splitting etc, and files quarterly MTD updates directly to HMRC.
- Digital Records from 6 April 2026 - MTD requires digital record-keeping from the start of the mandated tax year, not from your registration date. If you registered late, you will need to input your income and expense transactions from 6 April 2026 into your software before filing for Q1.
Introducing RentalBux: Our HMRC-Recognised MTD Software
Designed by accountants for landlords who are done with spreadsheets and the self-employed who need the same calm. RentalBux covers domestic and foreign property, auto-splits joint ownership profits, and files quarterly MTD updates directly to HMRC. Just in One Platform.
Conclusion
The soft landing period will not last. The first penalised quarterly deadline arrives on 7 August 2027, and the habits landlords build in 2026/27 are the ones they will be filing under a live penalty regime from that point.
Making Tax Digital is not difficult to get right. What makes it hard is leaving it until there is a problem to fix — a pile of estimated figures to untangle, a Final Declaration that does not reconcile, and a January deadline bearing down.
If you have not registered, that is the first step. If you are registered but uncertain whether your current approach will hold up at year-end, that is worth a conversation now rather than in January.
Book a Free 15-Minute Discovery Call
We work with landlords and sole traders across the UK on MTD registration, software set-up, and quarterly compliance. If you are unsure where you stand, whether that is registration, qualifying income, or what your quarterly updates should contain, book a free 15-minute call with our experts
FAQs
The first quarterly update for the 2026/27 tax year covers the period 6 April to 5 July 2026 and is due by 7 August 2026. Subsequent deadlines are 7 November 2026, 7 February 2027, and 7 May 2027.
Qualifying income is your combined gross income from UK property, foreign property, and self-employment, i.e., total turnover before any expenses, allowances, or deductions. It is not your profit. A landlord receiving £55,000 in rent who incurs £20,000 in allowable expenses still has a qualifying income of £55,000.
Yes. HMRC permits amendments to quarterly updates before the Final Declaration is submitted. However, submitting inaccurate figures and correcting them at year-end creates additional reconciliation work and increases the risk of errors in the Final Declaration.
No. The soft landing applies to penalty points for late quarterly submissions. It does not remove the obligation to register. Registration was required from 6 April 2026 for landlords with qualifying income above £50,000. If you have not registered, you are non-compliant.
No. MTD for Income Tax applies to unincorporated landlords, i.e., those holding property in their personal name or through a partnership. Rental income received by a limited company is subject to Corporation Tax, which falls outside the MTD for Income Tax regime.
Not necessarily, but professional support is worth considering if your income position is complex, you have multiple properties, or you have both property income and self-employment income to manage.
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