After lots of speculation, Making Tax Digital for Income Tax arrived last April. It impacts landlords and self employed people … although only those with over £50,000 of qualifying income … for now. HMRC estimates that around 864,000 taxpayers fall into this first phase of MTD for Income Tax. (Read about the other phases here.)
The first big test of the new initiative is here
The initial deadline has arrived! August 7 2026 is the cut-off date for submission of the first quarterly returns. Importantly, the details required are a tax update, not a tax return.
Are you impacted?
Are you registered and up-to-date, or playing catch-up?
A slow start to Making Tax Digital
By 2 July 2026, more than 350,000 taxpayers had registered for MTD, according to HMRC. That leaves a substantial number still to register – although HMRC says the level of take-up is broadly in line with expectations.
Earlier figures were even more revealing. An HMRC report showed that just 282,637 taxpayers had registered by 20 May, meaning more than 580,000 of the expected first-wave taxpayers had yet to sign up at that point. (Yorkshire Accountancy News)
Clearly, people have not rushed towards MTD registration, with only 45% prepared for the digital tax deadline of 7 August 2026. However, there is some positive news … among those already preparing, 40% said MTD had made them more organised and 28% said it had reduced last-minute tax stress. (Lloyds Banking Group)
Further research shows that 23% of sole traders surveyed have set up or begun setting up a limited company, partly or wholly to avoid MTD. 45% of affected sole traders say the reforms have left them considering a return to salaried work instead of being self employed. (accountingweb)
Wow. Why is there so much concern and hesitation?
Taxpayers’ concerns about Making Tax Digital
HMRC has commissioned research into people’s experiences of Making Tax Digital. ‘Respondents described MTD as poorly designed, badly communicated and not fit for purpose. Key concerns included extra cost and administration, software dependence, quarterly reporting burdens and confusing processes. Respondents expressed little confidence in HMRC’s ability to cope with the demands of MTD, given existing service and systems issues.’ (HMRC)
It’s not all bad news! HMRC’s case study features potter Natasha Patterson, who submitted her first update early. She found the process straightforward, taking around ten minutes, and particularly valued being able to see a forecast of her tax bill.
What happens if you’ve missed the deadline?
For the 2026/27 tax year, HMRC is not applying penalty points for missing quarterly update deadlines. So if you’re affected by MTD and haven’t submitted today’s update, you don’t need to panic. However, you do need to act!
‘You still need to meet the MTD requirements. Getting further behind will make the process more difficult,’ says Felicity Reader, Accounts Senior, of re:accounts Chartered Accountants in Stevenage. ‘Missing quarterly deadlines can result in penalty points. Once four points have been accumulated, you incur a £200 penalty. Further missed deadlines can result in additional £200 penalties. It’s better to be organised and save the stress and expense of falling behind.’
There’s more to come …
If you’re currently outside MTD, don’t assume it won’t affect you. MTD is coming to a lot more small businesses and landlords. The income threshold is due to fall to £30,000 from April 2027, and then to £20,000 from April 2028. (Read our MTD article.)
‘Don’t wait until HMRC sends you a reminder or until the next deadline is staring you in the face,’ advises Felicity. ‘If you think you may be affected, check your position now. Make sure your records are up to date, choose compatible software and understand what you’ll need to submit’.
Are you confused or concerned about MTD for Income Tax?
Making Tax Digital may be digital, but getting it right still comes down to people. Talk to the friendly experts at re:accounts Chartered Accountants. We’re here to help and love to cut through stuffy tax jargon. Let’s talk.
