Almost 428,000 taxpayers are estimated to have missed the first quarterly filing deadline under the Government’s new Making Tax Digital regime for Income Tax.
Figures from HMRC show that 436,000 taxpayers submitted their first quarterly update on time by the 7 August deadline – representing just over half of the 864,000 people estimated to be within the scope of the new system.
The figures mean an estimated 428,000 self-employed people, sole traders and landlords missed the first deadline.
The scale of the missed filings has been highlighted by Azets, the international accountancy and business advisory group, which has offices in Witney and Bicester.
Fraser Campbell, UK head of Accountancy and Business Advisory Services at Azets, said the number of people who missed the deadline was greater than the combined populations of Westminster and York.
He attributed some of the late submissions to the steep learning curve surrounding the introduction of the new system, including HMRC system downtime, registration issues, exemptions and deferrals, as well as the requirements of digital submissions for taxpayers with more complex financial affairs.
HMRC has waived penalties for late submissions during the first year of Making Tax Digital for Income Tax.
However, Campbell warned that taxpayers who delay getting into the system could face a significantly heavier administrative burden later.
Those who leave their first filing until the 2027 deadline could have to catch up with four quarterly filings from the current year alongside the following year’s quarterly submissions and their annual declaration.
That could mean as many as nine returns needing to be filed over a 12-month period.
Major change to the tax system
Making Tax Digital for Income Tax came into effect in April 2026 and represents one of the biggest changes to the personal tax system in decades.
The system requires taxpayers within scope to keep digital records and submit quarterly updates, replacing the previous system in which many affected individuals submitted a single annual tax return.
The number of people affected is expected to rise substantially, reaching around 2.9 million by 2028.
Campbell said the change represented a major challenge for some of the UK’s smallest businesses, which are having to adopt new processes and compliant software while dealing with wider economic pressures.
He also stressed that simply obtaining compliant software does not necessarily mean a taxpayer is ready to meet the new requirements.
“Becoming compliant isn’t a simple process,” he said, pointing to the accounting knowledge and diligence required to prepare accurate submissions.
Taxpayers urged to prepare for the next deadline
Despite the difficulties associated with the introduction of Making Tax Digital, Campbell said the system could eventually provide benefits for small businesses and landlords.
Quarterly digital information could give taxpayers a clearer picture of business performance and projected tax bills, potentially making tax planning and discussions with advisers easier.
Those who believe they are within scope are being urged to check their obligations, establish whether they qualify for an exemption and ensure that they or their accountant are using HMRC-compliant software.
With the first deadline now passed, taxpayers who are required to make quarterly submissions are being encouraged to prepare early for the next filing deadline rather than leaving their compliance until the last minute.
For Oxfordshire’s large community of self-employed people, sole traders and landlords, the transition means that tax administration is becoming a more regular part of running a business – rather than something dealt with once a year.
