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Missing your first Making Tax Digital quarterly deadline isn’t disastrous, but this is what you should do if it happens to you
Many sole entrepreneurs use Making Tax Digital for income tax, and the first round of quarterly submissions has already surprised a number of them. If you miss your first deadline, don’t panic; instead, take quick action. Here’s what happens next and how to correct the situation before a small error turns into a major one.
What MTD actually asks of you
Landlords and sole proprietors who make more than the income threshold are required by MTD for Income Tax to maintain digital records, submit a quarterly update to HMRC every three months, and make a final declaration at the end of the tax year. It’s a departure from the traditional annual self-assessment routine, and for many independent contractors, this break in rhythm is where things go awry. You don’t forget your annual tax return because it’s a fixed, well-known date. Quarterly deadlines are easier to lose track of, especially in a business’ first year on the new system.
The immediate consequences
Missing a single quarterly update isn’t the same disaster as missing your final tax return, but it isn’t nothing either.
Penalty points, not instant fines. Similar to penalty points on a driver’s license, HMRC’s new MTD penalty regime operates on a point-based basis. If you miss one quarterly deadline, you usually receive a warning point instead of an instant cash penalty. It’s only once you accumulate a set number of points within a rolling period that a fixed penalty kicks in. This is genuinely good news for anyone who misses a deadline through a one-off oversight — but it also means the second and third missed deadlines carry real weight, so it’s not a system to lean on.
Late data means late problems downstream. Even without a fine attached to the first miss, a late quarterly update throws off your running picture of income and expenses for the year. If you use that quarterly data to plan cash flow or estimate what you’ll owe at year-end, falling behind on submissions means falling behind on visibility into your own numbers — and surprises at year-end are exactly what MTD’s more frequent reporting was designed to avoid.
HMRC will follow up. Expect a reminder, and if updates continue to lapse, expect more formal contact. For early or infrequent infractions, HMRC’s MTD compliance policy favors repair over immediate penalty; nonetheless, persistent gaps in your digital records will eventually come under closer examination.
What to do next
- Submit the missed update as soon as you can. Don’t wait for the next quarter to ‘catch up’ — submit the overdue period separately, even if it’s late. A late submission is almost always better than a missing one.
- Check your digital record-keeping is actually current. A missed deadline is often a symptom of records that have fallen behind, not just a forgotten calendar date. If your bookkeeping software isn’t being updated in real time, that’s the root problem to fix, not just the deadline itself.
- Create buffer reminders in addition to deadline reminders. Instead of on the day of each quarterly cut-off, set a reminder in your calendar one full week in advance. Quarterly obligations don’t have the same built-in lead time as an annual return, so you need to manufacture that lead time yourself.
- Review whether your software is genuinely MTD-compatible. Not every piece of accounting software marketed as ‘MTD-ready’ integrates smoothly with quarterly submission in practice. If you’re regularly wrestling with your tool rather than your bookkeeping, that friction is worth addressing before it causes another missed deadline.
- Talk to HMRC if you’re struggling, not just when you’re overdue. If you know a deadline is at risk — because of illness, a system migration, or anything else — contacting HMRC proactively is treated far more favourably than going quiet and catching up later.
The bigger picture
A single missed quarterly update under MTD is recoverable, and the points-based penalty system is specifically designed to be forgiving of one-off lapses. But the sole traders who struggle most with MTD long-term aren’t the ones who miss a deadline once — they’re the ones who never fix the underlying record-keeping habit that caused it. Treat a missed deadline as a signal to tighten up your process now, and the quarterly rhythm becomes far less stressful going forward.
If you’re unsure whether your current setup is really compliant, it’s worth a conversation with an accountant who works with MTD day-to-day.
Elma Tranzesta is a tax and accounting advisor at Jungle Tax.
