His Majesty's Revenue and Customs (HMRC) is encountering a significant challenge in encouraging sole traders and landlords to adopt its Making Tax Digital (MTD) scheme, with less than half of the expected number registered ahead of a crucial August deadline.
As of the current financial year, only 400,000 sole traders and landlords have signed up for MTD. This figure falls short of the 864,000 individuals HMRC estimated needed to register by August 7. The digital tax scheme, first announced a decade ago, has faced numerous delays and has been met with criticism from business owners and accountants.
Since 2019, MTD for Value Added Tax (VAT) has been a mandatory requirement for all VAT-registered businesses above the £85,000 threshold, as well as those who have voluntarily registered. The scope of MTD expanded on April 1, 2026, to include sole traders and landlords earning over £50,000. Future thresholds are set to decrease, with the requirement applying to those earning over £30,000 from April 2027 and over £20,000 from 2028.
Data released from a Freedom of Information request by NFU Mutual indicated that by April 22, 2026, only 271,413 individuals had registered, with just 25,808 voluntary sign-ups. In the nearly three months since that data was collected, approximately 100,000 more registrations have occurred, even as the August deadline approaches.
"The initial number of registrations is relatively low," stated Sean McCann, chartered financial planner at NFU Mutual. He noted that HMRC's own estimates suggested 864,000 sole traders and landlords had qualifying income, yet by late April, only 31 percent had registered.
Sole traders and landlords are required to make their first MTD for income tax submission by August 7. Registration for the scheme can only be completed online, with no dedicated phone line or chatbot support available.
A spokesperson for HMRC acknowledged the ongoing registration process, stating that "thousands of customers are signing up for Making Tax Digital every week, in line with our expectations, and we expect further increases ahead of the 7 August deadline." The department has reportedly contacted millions of customers and conducted numerous events and webinars to promote the scheme. HMRC encourages all individuals required to join MTD this year to register promptly.
For individuals who miss the upcoming deadline, HMRC has indicated that they will receive a reminder letter. No penalties will be issued for the 2026/27 tax year for those who fail to register on time.