As the January 31, 2026, deadline for 2024/25 Self-Assessment approaches, UK sole traders and landlords are facing a pivotal transition. Beyond the immediate requirement to file returns and pay tax liabilities, this month marks the final straight before the mandatory introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) in April 2026. For those with combined gross income over £50,000, the compliance landscape is about to shift from an annual exercise to a quarterly, digital-first obligation.
The Penalties “Soft Landing”
Recognising the scale of this shift, the government confirmed a crucial “soft landing” for penalties in the November 2025 Budget. For the first group of taxpayers joining MTD in April 2026, HMRC will not apply penalty points for the late submission of the first four quarterly updates. This is a pragmatic recognition of the learning curve associated with new software and real-time record-keeping. However, this relief only applies to the submission of quarterly updates; the underlying obligation to keep digital records and the deadlines for final tax payments remain strictly enforced.
Preparing for the “March Letter”
HMRC will determine who must join the first phase of MTD based on the 2024/25 tax returns submitted this month. If your gross turnover exceeds £50,000, you should expect a formal notification letter by March 2026 at the latest. Businesses must use this month to verify their qualifying income—which includes combined turnover from all self-employment and property sources before expenses—to confirm their mandatory start date.
Critical January Actions
With 31 January also serving as the payment deadline for 2024/25 tax and the first payment on account for 2025/26, cash flow management is paramount. Taxpayers should ensure they have already chosen MTD-compatible software, as the transition requires moving away from paper records to a fully digital process. Using January to test digital workflows while completing the final traditional Self-Assessment will significantly reduce the administrative burden when the new rules take effect in April.
Is your software MTD-ready?
Contact our digital tax team today for a compatibility audit and ensure you benefit from the first-year “soft landing.”
The January 31 Tax Deadline: Self-Assessment Meets the MTD “Soft Landing”
As the January 31, 2026, deadline for 2024/25 Self-Assessment approaches, UK sole traders and landlords are facing a pivotal transition. Beyond the immediate requirement to file returns and pay tax liabilities, this month marks the final straight before the mandatory introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) in April 2026. For those with combined gross income over £50,000, the compliance landscape is about to shift from an annual exercise to a quarterly, digital-first obligation.
The Penalties “Soft Landing”
Recognising the scale of this shift, the government confirmed a crucial “soft landing” for penalties in the November 2025 Budget. For the first group of taxpayers joining MTD in April 2026, HMRC will not apply penalty points for the late submission of the first four quarterly updates. This is a pragmatic recognition of the learning curve associated with new software and real-time record-keeping. However, this relief only applies to the submission of quarterly updates; the underlying obligation to keep digital records and the deadlines for final tax payments remain strictly enforced.
Preparing for the “March Letter”
HMRC will determine who must join the first phase of MTD based on the 2024/25 tax returns submitted this month. If your gross turnover exceeds £50,000, you should expect a formal notification letter by March 2026 at the latest. Businesses must use this month to verify their qualifying income—which includes combined turnover from all self-employment and property sources before expenses—to confirm their mandatory start date.
Critical January Actions
With 31 January also serving as the payment deadline for 2024/25 tax and the first payment on account for 2025/26, cash flow management is paramount. Taxpayers should ensure they have already chosen MTD-compatible software, as the transition requires moving away from paper records to a fully digital process. Using January to test digital workflows while completing the final traditional Self-Assessment will significantly reduce the administrative burden when the new rules take effect in April.
Is your software MTD-ready?
Contact our digital tax team today for a compatibility audit and ensure you benefit from the first-year “soft landing.”