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Only a quarter of the landlords and sole traders who need to sign up for the UK’s new digital tax system have done so, new figures show, despite the scheme coming into effect this month.
From April 6, anyone who earned more than £50,000 in the 2024-25 tax year from self-employment or property income was required to use authorised software to keep digital records and send HM Revenue & Customs quarterly updates on their income and expenses, as part of the authority’s Making Tax Digital for Income Tax scheme.
In November, HMRC wrote to affected taxpayers, saying they would need to sign up and be ready to use the service from the start of the current tax year.
However, eight days after the April 6 deadline, only around a quarter of the 864,000 people required to sign up had done so, with approximately 218,000 registered for the service, according to figures provided to the FT by HMRC.
“We’re concerned, but not surprised, at how many are yet to register,” said Josh Toovey, senior research and policy officer at the Association of Independent Professionals and the Self-Employed (IPSE).
“There’s a significant awareness gap around these requirements, particularly among those who do not have the support of an accountant.”
Jason Appel, property partner at BKL, a London-based accounting, tax and business advisory firm, said: “Now that MTD compliance requirements are in effect for self-employed people and landlords, the gap between policy ambition and taxpayer readiness remains very wide.”
Despite the April 6 deadline, HMRC says it will not apply penalties for those who did not register by this date.
Under the rollout of the new system, sole traders and landlords have until August before their first quarterly update is due. The penalty regime for late filing is triggered after this date.
“We expect another wave of registrations ahead of that deadline,” added Toovey of IPSE. “However, our view remains the same. Much more needs to be done to bring this to people’s attention.”
HMRC said: “We are encouraging all customers who were required to sign up by April 6 to do so as soon as possible and expect sign-ups to rise through the first quarter in advance of the first quarterly update deadline on August 7.
“The pace of sign-ups is following an expected trajectory informed by our experience of successfully launching MTD for VAT.”
The reforms, seen as the biggest changes to tax since self-assessment was introduced in 1997, are part of the government’s goal to close the tax gap — the difference between what is owed and what people pay.
To promote the shake-up, HMRC has used paid advertising, including social media, radio, digital boards and influencer content, in addition to sending letters to affected taxpayers. The tax authority has not disclosed the budget for its awareness-raising campaign.
The measures will affect growing numbers of people over the next three years, with those earning more than £30,000 a year brought into reporting obligations from April 2027, and those earning more than £20,000 a year required to comply from April 2028.
Taxpayers can sign up to the service ahead of their reporting obligation. In total, HMRC said 246,000 people had signed up for MTD by April 14, including those who were not required to do so in the first wave.
