More than 100,000 taxpayers are yet to register for HMRC's new Making Tax Digital (MTD) system, which came into effect in April 2026, according to data showing only half of the 216,000 unrepresented taxpayers required to participate have signed up.
Who is affected by Making Tax Digital?
From April 2026, taxpayers with gross income exceeding £50,000 from self-employment or rental income must comply with MTD. The threshold will lower to £30,000 from April 2027 and further to £20,000 from April 2028. The system, introduced by HMRC and the Labour government, aims to digitize tax reporting.
Concerns over lack of awareness
Harvey Dhillon, founder and CEO of accountants Zmartly, highlighted that the 100,000 unregistered individuals are largely unrepresented taxpayers—those without an accountant to remind them. He emphasised that MTD is an administrative change, not a new tax, and that the main challenge is obtaining compatible software and establishing a routine. HMRC has stated it will not charge late-update penalties in the first year, a reassurance Dhillon believes should be prominently communicated.
“Digital records should reduce careless errors over time, but rushing the least-equipped risks more mistakes, not fewer. If you are over the line, get set up before the early-August update, not in the scramble the night before,” Dhillon added.
Business owner experiences confusion
Dr. Marianne Trent, a clinical psychologist at Coventry-based Good Thinking Psychology, shared her experience as a business owner registered for MTD. She found the process confusing despite having an accountant, as she assumed registration would be handled by them. She managed to register before the deadline but remains uncertain about her first regular return due next month, relying on software like Xero to manage it.
“I personally and professionally find it a bit disheartening that this extra step has been added as I was already reporting and paying my tax correctly, so it feels a little bit of an unnecessary hurdle for already law-abiding companies,” Trent said.
