Making Tax Digital: Are You Ready?

The rollout of Making Tax Digital (MTD) is gathering pace, but recent figures suggest many sole traders and landlords are still unprepared for the changes ahead.

According to HMRC, fewer than half of the businesses expected to register for MTD have done so. Since the start of the financial year, around 400,000 people have signed up, well short of the 864,000 registrations needed before the 7th August milestone.

What is Making Tax Digital?

Making Tax Digital is HMRC’s long-term initiative to modernise the UK tax system by replacing paper records and annual tax returns with digital record-keeping and more frequent reporting.

The programme has been in development for almost a decade and has seen several delays along the way. While the transition has not been without its challenges, the move towards digital tax reporting is now becoming a reality for increasing numbers of taxpayers.

Who is affected?

Making Tax Digital has already been mandatory for many businesses.

Since 2019, all VAT-registered businesses with taxable turnover above the VAT threshold have been required to keep digital records and submit VAT returns using compatible software. This also applies to businesses that have voluntarily registered for VAT.

The next phase affects self-employed individuals and landlords:

• From April 2026 – Sole traders and landlords with annual income over £50,000 must comply.
• From April 2027 – The threshold reduces to £30,000.
• From April 2028 – It falls again to £20,000, bringing many more individuals into the scheme.

Why are registrations so low?

Many smaller businesses and landlords are understandably hesitant about moving to digital record-keeping and quarterly reporting. Some are unsure whether they are affected, while others are waiting until the last possible moment before making the switch.

However, the current registration figures suggest a significant number of taxpayers could be caught unprepared when the rules become mandatory.

Will there be penalties?

HMRC has confirmed that anyone who misses the current registration deadline for the 2026/27 tax year will receive a reminder letter rather than an immediate penalty. This grace period is intended to help taxpayers transition into the new system.

That said, relying on the extra time isn’t recommended. Preparing early allows you to choose suitable accounting software, become familiar with the new reporting process and avoid unnecessary stress as the deadlines approach.

How Chapmans Business Solutions can help

If you’re self-employed or receive rental income, now is the ideal time to review whether Making Tax Digital will affect you.

At Chapmans Business Solutions, we can help you understand your obligations, choose the right accounting software and ensure you’re fully prepared well before the mandatory deadlines arrive.

If you’re unsure whether MTD applies to you, get in touch with our team today for friendly and practical advice on 01775 529345 or drop us an email at office@cbsltd.org.