428,000 miss Making Tax Digital’s first filing deadline – Azets

Almost half the people eligible for Making Tax Digital (MTD) for Income Tax have missed the first filing deadline, according an analysis from accountancy and business advisory group Azets.

Figures from HMRC showed 436,000 taxpayers filed their first MTD for Income Tax quarterly update on time on August 7 –  50.5% of those who should have.

But with more than 864,000 people in scope of the initiative, an estimated 428,000 self-employed, sole traders and landlords had missed the first quarterly deadline.

Azets has three offices in Yorkshire, in Leeds, Bradford and York, where it employs 335 people.

Fraser Campbell, UK head of accountancy and business advisory services at Azets, said: “The number of people who missed the first MTD for Income Tax deadline is greater than the combined populations of Westminster and York.

“This is partly due to the fact that learning curve for taxpayers and their accountants has been very steep in the lead up to the first quarter submission, with HMRC system downtime, registration glitches, managing exemptions and deferrals, and coming to terms with limitations and requirements of the digital submission process for taxpayers with more complex affairs contributing to a number of late submissions across the UK.

“HMRC have waived fines for the first year of this initiative and that is definitely needed given this learning curve, and the process will get smoother for those now in the system next time around.

“However, those that have left it late to engage in the requirements are setting themselves up for pain in the future, so it’s worth getting the next quarter’s submission in as quickly as possible and starting to prepare for the November filing deadline as quickly as possible.

“While HMRC have said they won’t fine those who file their submissions late, anyone who leaves their first filing until the 2027 deadline will need to catch up with four filings from this year at the same time as next year’s quarterly filings become due, as well as their annual declaration, so they’ll have to potentially file nine returns over the same 12 month period.”

The introduction of MTD for Income Tax in April 2026 was the biggest change in the personal tax system in more than 30 years and brought it closer to real-time.

Expected to affect 2.9m people by 2028, MTD for Income Tax introduced quarterly digital record keeping and reporting obligations for hundreds of thousands of landlords, sole traders and the self-employed, who previously only had to submit one tax return a year.

Fraser said: “This is a major change for some of the smallest businesses in the UK.

“They’ve had to familiarise themselves and work with new processes and MTD compliant software at  a time when many are struggling through difficult economic headwinds.

“A lot has been said about the free software on the market and while there are some good free options available, having the software alone won’t help people comply with the requirements of MTD.

“Becoming compliant isn’t a simple process as getting the filings ready for submission requires accounting knowledge and a lot of diligence, so I’d encourage anyone who is in scope – either now or in the future – to speak to an accountant for advice and support.

“The quarterly submissions form the basis of the end of year tax calculation.

“It is crucial that these are done accurately to make sure the right amount of tax is paid at the end of the tax year and that the person involved has as accurate an idea as possible of how much money they need to hold back to make this payment.”

Campbell also pointed out the positives of the new regime.

He said: “The introduction of MTD should also make forward tax planning and forecasting and the year-end process a lot smoother.

“It will give people real-time digital information about their business performance and projected tax bills, which will be hugely helpful for any discussions they have with their tax adviser, and give them the information they need to better manage their savings and tax payments.

“My advice for anyone who thinks they are in scope of MTD is to check whether they fall in line with the new reporting obligations, ensure the software you or your accountant is using is HMRC compliant and start using HMRC compliant software now if it isn’t, and check whether you’re exempt from the new regime – you might be, so it’s worth looking at HMRC’s website or speaking to an accountant.”

Azets has three offices in Yorkshire, in Leeds, Bradford and York, where it employs 335 people.

The figures are for the UK, with no regional breakdown available as yet.

For more information about Azets, visit www.azets.co.uk