HMRC has insisted that the rollout of Making Tax Digital (MTD) for Income Tax remains on track, despite data showing that a substantial number of affected taxpayers do not have professional representation as the April 2026 deadline approaches.
Jonathan Athow, HMRC’s director general for tax design, addressed the issue during a recent appearance before the Treasury Committee. Committee chair Dame Meg Hillier questioned whether businesses and individuals were sufficiently aware of the new obligations they will soon face.
What is changing under Making Tax Digital?
From 6 April 2026, sole traders, self-employed individuals and landlords with gross income above £50,000 will be required to keep digital records using compatible accounting software. They will also need to submit quarterly updates to HMRC, followed by an end-of-year statement.
The income threshold applies only to self-employment and property income and does not include dividends.
HMRC estimates that 864,000 taxpayers will be brought into MTD for Income Tax in the first phase of the rollout. However, around 40% of this group currently do not use an accountant, tax adviser or bookkeeper. This means nearly 350,000 individuals will be expected to comply with the new digital requirements without professional support.
Concerns over unrepresented taxpayers
Athow told MPs:
“Within the group coming in April, many are already using agents, I think around 60%. For those people we need to talk to their accountants and bookkeepers. I’m confident from the evidence, we are seeing high levels of understanding in the accounting industry, whether it’s quite 100% I don’t know.”
The remaining 40% of taxpayers were identified as the key area of concern. Athow acknowledged the difficulty HMRC faces in reaching those without advisers, saying:
“The challenge for us is the unrepresented group. As we know sometimes our correspondence is not scrutinised with the level of diligence we would like. We are going to be writing to them again.”
He also highlighted sectors where poor record-keeping and low agent representation are common:
“Construction is a really big one, many are in the construction sector and many do not keep records. So we are targeting those sectors through targeted communications or through their sector bodies.”
Athow stressed that HMRC recognises the challenges involved in the transition and confirmed:
“It is a challenge – in the first year there will be no penalties for missed quarterly updates.”
HMRC steps up awareness activity
With less than three months to go before the launch, HMRC is increasing its efforts to raise awareness. Athow referred to a recent House of Commons reception marking the launch of a partnership between Checkatrade and accounting software provider Sage. The initiative offers basic free MTD-compliant software and is aimed at tradespeople, particularly those working in construction and related sectors.
Reflecting on the event, he said:
“There is a lot of awareness, and a lot those players are helping us. But it is a challenge. We know this is the first year we are doing this, we know that some people will come to this late.”
April launch still confirmed
The committee also asked whether the April start date remained firm. Athow confirmed there were no plans to delay the rollout, stating:
“Yes, there is nothing I know of at the moment that means there is any doubt about that.
We are on track, we have our own programme of governance, it’s very important we continue to monitor the risks as we get closer to implementation.”
He also confirmed that the planned expansion of MTD remains unchanged, with thresholds lowering to £30,000 in 2027 and £20,000 in 2028.
Will MTD increase tax receipts?
In a lighter exchange, Dame Meg Hillier remarked that Athow’s response had been “very carefully worded” before asking whether the new system would result in an increase in tax collected.
Athow responded:
“At the moment, MTD does not change payment dates, only the reporting information. We see problems in this cohort (sole traders and landlords) where people don’t keep good records.
We think keeping record in software and updating on a quarterly basis will encourage people to have that near real time record keeping, we think it will increase compliance and bring in additional yield.”
When pressed on the expected financial impact, Athow added:
“by the end of the rollout it’s just under £1bn, but that does vary as we update assumptions”.
