One week after Making Tax Digital (MTD) for Income Tax became mandatory, HMRC has confirmed that 250,000 users have registered, with the majority of sign‑ups coming from accountants and agents rather than individual landlords or self‑employed taxpayers.

With just four months remaining until the first quarterly update is due, HMRC data suggests that only around 80,000 individual taxpayers have enrolled in the new digital reporting regime. This remains some distance from the estimated 864,000 individuals expected to fall within the first wave of MTD, covering those with qualifying income of £50,000 or more for the 2024–25 tax year.

A late change in HMRC’s approach means that some taxpayers whose income has since dropped below the £50,000 threshold may now be able to leave the MTD regime. To do so, affected individuals must contact HMRC directly to confirm that their income has fallen below the threshold. This clarification was issued shortly before MTD became mandatory and was welcomed by advisers, as the original position offered no clear exit route.

Despite reaching 250,000 registrations, close to 600,000 affected taxpayers have yet to sign up. To date, registrations have been dominated by tax agents and accountancy firms, raising concerns about whether HMRC can achieve full participation ahead of the first quarterly submission deadline on Friday 7 August.

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Craig Ogilvie, Director of Making Tax Digital at HMRC, confirmed that 69% of registrations have been completed by agents. Commenting on early filing activity, he noted that for end‑of‑year submissions for 2025–26, FreeAgent currently leads, followed by Untied and Thomson Reuters, thanking providers and advisers for their efforts.

Early Pilot Activity

Participants in the original MTD for Income Tax pilot are now beginning to submit their end‑of‑year returns. Thomson Reuters confirmed that its first pilot customer has successfully filed a 2025–26 final declaration using its HMRC‑recognised Digita MTD software, marking a key transition from pilot testing to live operation.

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While pilot users appear well prepared, there remains scepticism over broader awareness and readiness among the wider population affected by MTD.

Donna Taylor, Head of Customer Success at practice management firm Glasscubes, said the key challenge is not whether the software functions correctly, but whether clients will be able to use it independently without requiring ongoing support every quarter.

Awareness Remains a Major Concern

Research by FreeAgent found that 39% of small business owners have never heard of MTD, while 19% say they do not understand MTD for Income Tax at all, despite quarterly digital reporting now being a legal requirement. A further 20% of sole traders remain unclear on how the rules apply to them.

Under MTD for Income Tax, from 6 April, sole traders, self‑employed individuals and landlords with qualifying income exceeding £50,000 for the 2024–25 tax year must maintain digital records and submit quarterly updates to HMRC using compliant software. The threshold is set to fall to £30,000 from April 2027.

HMRC: A Major System Reform

For HMRC and the government, MTD is positioned as a key tool in tackling tax error, avoidance and evasion, and in reducing the UK’s tax gap.

Dan Tomlinson, Treasury minister responsible for HMRC, has described MTD as “the biggest modernisation of the tax system for a generation”. He noted that under the existing system, business records may be completed up to 21 months after transactions occur, increasing the likelihood of avoidable errors.

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HMRC estimates that around £6bn is lost each year due to inaccuracies in Self Assessment business returns. By keeping digital, up‑to‑date records, HMRC believes MTD will reduce errors, protect revenue and help taxpayers stay on top of their finances throughout the year.

It is important to note that quarterly updates under MTD do not replace the annual Self Assessment tax return. Annual finalisation requirements remain unchanged, with the 31 January filing deadline continuing to apply.

What This Means for Taxpayers

Leigh Thomas, Vice President at Intuit, said that while MTD is often viewed as a compliance burden, it can also act as a platform for better financial understanding. He described MTD as a “growth gateway”, enabling business owners to make more informed day‑to‑day decisions using accurate, real‑time data.

Whatever the differing views, MTD for Income Tax is now firmly in place. While there is still time for affected taxpayers to register, it is essential that digital records are being maintained and that submissions can be made to HMRC via MTD‑compatible commercial software.