About 436,000 sole traders and landlords submitted their first quarterly update under the government's Making Tax Digital for Income Tax programme on time, representing roughly half of those required to join the system this year.

The figures provide an early indication of take-up of one of HM Revenue & Customs' biggest changes to Self Assessment, which became mandatory in April for sole traders and landlords with qualifying annual income above £50,000.

HMRC had estimated that more than 864,000 taxpayers would fall within the first phase. About 570,000 had signed up to the service by the first reporting deadline, according to the tax authority.

Under Making Tax Digital, affected taxpayers must maintain digital records using compatible software and provide HMRC with quarterly summaries of their self-employment and property income and expenses. The first update, covering the opening months of the 2026-27 tax year, was due by August 7.

The scheme will expand significantly over the next two years. Sole traders and landlords with qualifying income above £30,000 will be brought into the system from April 2027, followed by those earning more than £20,000 from April 2028.

HMRC has introduced transitional arrangements for the first group, meaning there will be no penalties for missing quarterly update deadlines during the 2026-27 tax year. Taxpayers must nevertheless provide the updates before submitting their annual return.

From subsequent years, late quarterly submissions will fall under a points-based penalty regime. Taxpayers will receive a point for each missed quarterly deadline and, once the four-point threshold is reached, face a £200 penalty, followed by another £200 for subsequent missed deadlines while at the threshold.

Elsa Littlewood, private client services tax partner at BDO, said the number filing on time was encouraging but highlighted the scale of the remaining challenge.

“Clearly, HMRC is pleased that 436,000 sole traders and landlords have submitted their first quarterly Making Tax Digital for Income Tax report on time,” she said. “However, this is just half of the estimated 864,000 taxpayers who should have reported in the first wave.”

Littlewood said HMRC's next challenge would be increasing participation among taxpayers who had yet to engage with the system, particularly as Making Tax Digital expands to lower-income groups from next April.