864,000 Sole Traders Face First Making Tax Digital Deadline in Two Weeks

More than 864,000 sole traders and landlords have just two weeks to submit their first quarterly update under Making Tax Digital (MTD) for Income Tax, according to HM Revenue and Customs^[1]. The deadline of 7 August 2026 marks the first mandatory reporting period for self-employed individuals and property landlords earning more than £50,000 annually.

The quarterly update covers income and expenses for the first three months of the 2026-27 tax year and must be submitted through recognised software. HMRC has emphasised that the update is not a tax return but "a short summary sent directly to HMRC through recognised software and takes minutes to complete"^[1].

Craig Ogilvie, HMRC's Director of Making Tax Digital, described the moment as "a landmark moment for the tax system"^[1], adding: "Hundreds of thousands of sole traders and landlords are now keeping digital records and will be sending their first quarterly update in the coming weeks."^[1]

What MTD for Income Tax Requires

Making Tax Digital for Income Tax is now a legal requirement for those in scope. Customers must ensure they are signed up, that their software is compatible, and submit their update before the deadline^[1].

Those who have not yet signed up can still do so by visiting GOV.UK, where they can find software options and access free guidance and webinars. Customers using an agent can authorise their agent to sign them up instead^[1].

Some software includes HMRC Assist, a digital support tool that provides tailored feedback to help customers identify potential errors before submission. After each quarterly update, users can see an estimate of their tax bill, helping them plan ahead^[1].

The MTD requirement will extend to those earning more than £30,000 in future phases, though HMRC has not yet announced the timeline for this expansion^[1].

Side Hustles and the £1,000 Threshold

Alongside the MTD deadline, HMRC has been running a campaign reminding individuals earning extra income from side hustles to check their tax obligations. On 21 July 2026, HMRC published guidance stating that anyone earning more than £1,000 from a side hustle in a tax year may need to complete a Self Assessment tax return^[2].

Kevin Hubbard, HMRC's Director of Small Business & Individuals, said: "For many people, a side hustle is a valuable source of extra income. If you're earning more than £1,000 a year from your side hustle it's important to understand your tax responsibilities, and HMRC wants to make that as straightforward as possible."^[2]

The guidance targets wedding suppliers, parents running hobby businesses, and content creators making money from online activities. New entrants to Self Assessment should register for the 2025 to 2026 tax year by 5 October 2026, then file their online tax return and pay any tax due by 31 January 2027^[2].

UK Register Context: Self-Employment Sectors

Across the UK company register as a whole, certain sectors show particularly high concentrations of businesses that may include sole traders and self-employed individuals, according to CompanyPulse data^[3]. These economy-wide figures provide context for the scale of self-employment across the UK, though they represent all registered companies rather than specifically those affected by MTD.

The register shows 439,550 companies in the "other letting and operating of own or leased real estate" sector (SIC code 68209), 270,878 in "buying and selling of own real estate" (68100), and 268,073 in "management consultancy activities other than financial management" (70229)^[3].

Other sectors with substantial numbers include information technology consultancy (162,903 companies), online retail (192,685), and business support services (221,013). Construction-related activities show 114,432 companies in building project development and 97,499 in construction of domestic buildings^[3].

Service sectors include 149,990 companies in "other service activities", 80,312 in take-away food shops and mobile food stands, and 72,857 in hairdressing and beauty treatment^[3]. Freight transport by road accounts for 71,889 registered companies^[3].

The total UK company register stands at 6.46 million companies, with 5.57 million currently active^[3]. In the seven days to 23 July 2026, 15,431 new companies were incorporated^[3].

Recent Company Formation Activity

Daily incorporation data from the Companies House register shows formation activity between late June and late July 2026. On 23 July 2026, 2,376 companies were incorporated, while 24 July saw 2,859 incorporations^[3]. Peak activity in the period occurred on 20 July with 3,469 incorporations, and 21 July with 3,236^[3].

Companies incorporated since April 2026 will be establishing their accounting and tax reporting processes during the first phase of Making Tax Digital implementation. Those meeting the £50,000 income threshold will need to comply with quarterly update requirements from their first full tax year of operation.

Compliance Preparations and Next Steps

HMRC has urged those already using software that the process "should be straightforward and take minutes"^[1]. For those who have not yet signed up, the department has emphasised there is still time to register and submit the first update before the 7 August deadline^[1].

The introduction of Making Tax Digital for Income Tax represents a significant shift in how self-employed individuals and landlords interact with the tax system. While the initial phase affects 864,000 taxpayers earning over £50,000, future expansion to the £30,000 threshold will bring substantially more individuals into the digital reporting regime.

HMRC has provided a free online tool on GOV.UK that helps people earning additional income check whether and when they need to report it. The tool takes a few minutes to complete and explains the registration process for those who need to file a Self Assessment tax return^[2].

The 7 August 2026 deadline represents the first of four quarterly reporting periods in the tax year. Subsequent deadlines will follow at three-month intervals, with taxpayers required to maintain digital records and submit updates through approved software throughout the year.