Making Tax Digital flops

Aug 12
2 min read

Making Tax Digital (MTD), described as the biggest reform of the UK tax regime in a generation, has flopped.

Latest figures suggest that of the 864,000 who were obliged to file a quarterly report on Friday 7 August covering the period 6 April 2026 to 5 July 2026, only around 400,000 have done so.

The estimates come from the Association of Chartered Certified Accountants (ACCA).

MTD targets sole traders and landlords.

The update covers income and expenses for the first three months of the tax year. The deadline for submitting it to HM Revenue and Customs (HMRC) was 7 August 2026.

Taxpayers still have to file a full tax return once a year, but they also now have to send quarterly updates during the year.

Importantly, the quarterly updates are just summaries of income and expenses to HMRC during the tax year. No tax payments are due resulting from the summaries.

The reports are short summaries sent directly to HMRC through recognised software and, said HMRC, take minutes to complete.

If the figures are right and the majority have not filed, over half of those who fall under the scheme have not participated.

Punishments will be light, as HMRC has confirmed that no penalty points will be issued for late quarterly updates during the first year of MTD for Income Tax. However, penalties do still apply for late Self Assessment returns and late payments.

Things get tougher after the second year, when points-based penalties will apply where taxpayers miss a quarterly deadline. Taxpayers receive one penalty point for each missed quarterly deadline. Once four points are accumulated, a £200 fixed penalty is charged. Points expire after a period of compliance.

Craig Ogilvie, HMRC's Director of Making Tax Digital, said:

"This is a landmark moment for the tax system. 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.

“For those already using software, this should be straightforward and take minutes. If you haven't signed up yet, there is still time..."

MTD for Income Tax became mandatory from April 2026 for sole traders and landlords with qualifying income over £50,000.