More than 100,000 self-employed workers and landlords have not signed up for Making Tax Digital (MTD), a policy described as 'ill-thought-out' by critics. The change, which is a legal requirement, shifts self-assessment tax reporting from an annual return to quarterly updates.
Low Registration Rates Among Unrepresented Taxpayers
An analysis by the Low Incomes Tax Reform Group (LITRG) of HMRC figures reveals that just over half of the 216,000 unrepresented taxpayers required to participate in MTD from April 2026 have not registered more than two months after the launch. This means around 111,000 people are still unregistered, representing 52% of the unrepresented taxpayer population.
From April 2026, taxpayers with gross income exceeding £50,000 from self-employment or rental income must use MTD. The threshold will drop to £30,000 in April 2027 and to £20,000 in April 2028.
Business Owners and Accountants Voice Concerns
Harvey Dhillon, founder and CEO of accountants Zmartly, expressed surprise that many small business owners remain unaware. 'The 100,000 who still haven't signed up are the unrepresented taxpayers, the people with no accountant to nudge them, so it is little wonder the message hasn't reached them,' he said. He emphasised that MTD is an administrative change, not a new tax, and noted that HMRC will not charge late-update penalties in the first year.
Dr Marianne Trent, a clinical psychologist at Good Thinking Psychology, described the system as 'pretty confusing.' She said, 'I have an accountant and even though I received a letter from HMRC, I wrongly assumed my registration would be handled by my accountant. It feels a little bit like an unnecessary hurdle for already law-abiding companies.'
Landlords Face Additional Burdens
Bob Singh, founder of Chess Mortgages, criticised the inclusion of rental income in the £50,000 threshold. 'Anyone with two or three properties will now have to file returns four times a year,' he said. 'While the idea may be to drive everyone to trading as limited companies, HMRC hasn't thought about how to make it easier for portfolio landlords to transfer legal titles.'
Matthew Knight, chief freelance officer at Freelancing.Support, highlighted the lack of publicity. 'New policies need better communication, education, and support. This is the biggest change in over 20 years in how tax is reported, yet awareness is painfully low for those without accountants.'
HMRC's Perspective and Future Impact
HMRC stated that MTD will make tax easier and provide a clearer view of business health. 'With Making Tax Digital for Income Tax, you'll use your digital records to send quarterly updates to HMRC. Sending quarterly updates will give you a better view of the health of your business and help you estimate your tax bill,' a spokesperson said.
Colette Mason, AI ethics consultant at Clever Clogs AI, noted that quarterly reporting could prevent tax shocks but criticised the focus on small businesses over larger corporations. 'If only the same pathological pursuit from HMRC were applied to bigger companies,' she said.
