The first quarterly filing deadline for Making Tax Digital for Income Tax (MTD for Income Tax) passed on 7 August. HMRC expected 864,000 sole traders and landlords earning over £50,000 to complete the filing.
However, this proved not to be the case, with only 436,000 eligible individuals submitting their quarterly update by the deadline.
One of London’s leading accountancy firms, Grunberg, part of Xeinadin, has provided some insight into why uptake has been slower than expected.
Aneliya Tabakova, Associate Tax Director at Grunberg, said: “Understanding of MTD has varied significantly among clients, depending on their engagement with their finances and their familiarity with digital tools.
“Clients who were already using accounting software have adapted relatively smoothly, as the transition has been more about a change in reporting frequency than a fundamental shift in how they manage their records.
“However, a substantial proportion of taxpayers, particularly those with simpler affairs or those previously filing a straightforward Self Assessment return once a year, have a limited understanding of what MTD actually requires of them.”
A lack of understanding is not the only reason people are struggling to comply with MTD.
Aneliya said: “A significant number of taxpayers simply are not aware that MTD applies to them or do not know when their obligations begin, particularly those without an agent or with limited previous engagement with HMRC communications.
“Many are also put off by the perceived complexity and cost of the transition. The need to purchase and learn new software can feel disproportionate, especially for those who are less digitally confident or whose income does not seem to justify the effort involved.
“Many taxpayers have filed a single annual Self-Assessment return for years without any issues and see little incentive to change their approach until they are required to.”
In the 2026/27 tax year, there are currently no penalties for missing quarterly filing deadlines.
However, from April 2027, taxpayers who miss quarterly filing deadlines will begin to receive penalty points, which could ultimately lead to fines.
Aneliya said: “Ahead of the next deadline, clients need to start their conversations earlier rather than waiting until the days immediately before a deadline. Doing so will be essential for success.
“We also encourage clients to reconcile their records throughout the quarter rather than leaving everything until the final few days.”
