Nearly two months in, only 35 per cent have registered for Making Tax Digital – Are you risking compliance issues?

Making Tax Digital (MTD) for Income Tax is an undeniably monumental shift in how tax filing is conducted, yet the messaging around it is still not connecting with those affected.

Sole traders, landlords and self-employed individuals with qualifying incomes over £50,000 needed to register for MTD on 6 April 2026, yet only 35 per cent of them have done so.

HMRC used an appearance at Accountex London 2026 to change up the messaging around MTD, but there are no concerns that this new angle might open up other compliance issues.

What is going wrong with Making Tax Digital?

It may be too early to declare the launch of MTD a failure, but it is clear that something is not resonating with the people impacted.

A cynical view might be that the lack of penalties in 2026 is causing the obligation to be viewed as a suggestion instead.

However, even this view speaks to a more underlying problem.

The value of MTD is not being seen by those who would benefit the most from it and this concern seems to be shared by HMRC.

Speaking at Accountex, HMRC sought to reassure those who had not yet registered that the quarterly updates were not something to dread.

It was made apparent that they would not need to be perfect and could be seen as a checkpoint on the road to the annual tax filing.

This means that the quarterly updates can be amended or updated later on without issue.

While this might seem like a positive suggestion, the unintended consequences of this on a disillusioned population should be considered.

Are quarterly updates likely to pose a compliance risk?

The penalty system for MTD will take effect in April 2027, meaning that the quarterly update due 7 August 2027 is the first with penalties attached.

While there is little inherently problematic about that, the reticence to register for MTD this year combined with the casual approach to the data inputted to a quarterly update could form a major headache for the annual tax filing itself.

Given that the information submitted to a quarterly update does not need to be complete and can be amended later, some may feel that it is better to get the update across the line to dodge a penalty rather than make sure the data is accurate.

If the annual tax filing comes to be submitted on the back of erroneous quarterly updates, it will be an arduous process to straighten out the data and ensure that the annual statement can be filed accurately.

Best practice will be to take the quarterly updates seriously and ensure that data is accurate and comprehensive at each deadline.

Why is the value of Making Tax Digital being missed?

The real value of MTD comes from something that many people may not realise is important – visibility on one’s financial situation.

If you have been managing your own income for years using filing cabinets and various sheets of paper, possibly even with a spreadsheet here or there, it might seem illogical to upend that system now.

However, the turbulent economic times that we are enduring reveal that being able to dynamically adjust to market changes is vital.

The quarterly updates are supposed to pair with the accounting software to give you more visibility of your money and tax obligations so that you can budget more effectively.

This could help you be bold when the time is right or play it safe when times are tough.

If you do not see the value or the point of MTD, we are here to help.

Getting support from our expert team can help you understand the impact MTD will have on you specifically.

We can review your processes to show you what can be migrated to new systems and how greater visibility will enhance your decision-making.

If software is getting you down, we can help match you to something that suits your needs and your budget.

We feel that MTD will help sole traders, landlords and self-employed individuals in the long run, but only if they are able to approach it with confidence.