With the upcoming 7 August deadline, HMRC reports that it is still waiting for over half of those affected by Making Tax Digital (MTD) to register, let alone file their returns by the deadline.
This is the first wave of MTD registrations that are set to come over the following years. However, only 375,000 people have registered out of the 864,000 that are supposed to.
It is widely believed that many people are not signing up because they don’t think the MTD rules apply to them. It is imperative to check your income to see if you reach the threshold ahead of the deadline.
What is MTD and am I eligible?
MTD is an initiative that aims to modernise the tax system by moving away from paper records and annual returns to a fully digital approach.
This means that self-employed individuals and landlords must keep digital records and send updates to HMRC every quarter, alongside one return per year.
The quarterly update deadlines are:
- 7 August
- 7 November
- 7 February
- 7 May
At the end of the tax year, you should then submit an End of Period Statement (EOPS) along with a final declaration to confirm your total income and calculate your final tax bill.
To do this, taxpayers must use HMRC-approved software, such as Xero or QuickBooks.
To be affected by MTD in 2026, you must have earned more than £50,000 in gross income from self-employment or property income in the 2024/2025 tax year.
MTD is designed to reduce errors, improve accuracy and make it easier for taxpayers to keep track of their finances throughout the year.
What are the penalties?
There are no penalties for missing the 7 August deadline or any quarterly updates this year. However, penalties for future non-compliance may be quite costly.
The new late submission penalties are points-based – for each quarterly update or tax return deadline that you miss, you will get a penalty point.
You can get four points before you face a £200 penalty. For every other missed submission deadline, you will be charged a further £200 fine.
If you are registered for VAT, your penalty points will be separated per service.
Late payment penalties will operate slightly differently. If you receive a late payment penalty, the amount you pay will depend on how long it takes you to pay what you owe – the sooner you pay, the less your penalty charge will be.
How to register for MTD
If you are a sole trader or landlord earning over the threshold, you can use the HMRC online service to sign up for MTD. However, there are fears that it is now too late to do it yourself.
If you do not have up to date MTD compatible software, you need to get in touch with an accountant to manage your taxes ahead of the first quarterly deadline.
An accountant will set up your HMRC-recognised software, automate record keeping and submit the quarterly updates directly to HMRC on your behalf.
Our team can help you ensure compliance and lessen the chance of errors with the deadline quickly approaching.
Get in touch today for assistance with MTD.
