Only one in 10 taxpayers in first wave of Making Tax Digital for Income Tax signed up to the new quarterly reporting due to start in three weeks’ time.

HMRC MTD expert Jim Rogers told delegates at the annual Finance, Accounting & Bookkeeping Show (FAB) this week that only 81,000 sole traders, landlords and self employed have completed registration for MTD for Income Tax.

This leaves 90% of the 864,000 taxpayers due to be dragged into the system holding off sign-up with the start date for MTD only weeks away on 6 April. Rogers also said HMRC has received 2,200 exemption requests so far.

Only 4,000 people were in the pilot, reflecting the scale of HMRC’s job to create sufficient awareness about the major overhaul of the tax system and to persuade taxpayers to take action and sign up.  

The MTD system requires quarterly reporting by affected taxpayers with qualifying income over £50,000 with the first deadline for filing earnings on Friday 7 August 2026. It requires two submissions if income is split between earnings and property income, and there is no free HMRC software for filings.  

The first tranche of taxpayers have been sent several letters from HMRC about the upcoming changes, encouraging them to sign up for the start of the tax year on 6 April. TV and social media was rammed with MTD ads from software companies and HMRC at the start of the year, but this seems to have dropped off somewhat.

Under the new MTD regime, income has to be filed digitally using commercial software, although bridging software can be used.

While 6 April is HMRC’s preferred registration deadline, there is still time to take action with the first actual filing deadline of income not until early August.

With the first filing deadline on 7 August, the £50,000 wave do have time to scope out options. In an online MTD poll of accountants, tax advisers and individuals taxpayers, during last week’s Business & Accountancy Daily webinar on new tax year changes, 40% of respondents said they were ready and automated, 25% were still using manual spreadsheets, while 32% were still looking at software options. Only 3% were totally unprepared, saying they ‘need help with a plan’.

Reflecting the enormity of the changes and fears about higher costs, even banks, including Monzo, Royal Bank of Scotland, Mettle, HSBC and Starling Bank are all offering business account customers free MTD filing software.

Monzo Business has a free MTD software tool recognised by HMRC and provided through Sage Embedded Services. It is not yet live, but bank business customers can pre-register on the website and Monzo said it ‘will be fully available before the new tax year starts on 6 April’. The tax tool is available to use on all free and paid Monzo Business account plans, and is built into Monzo Business as standard. It will allow customers to file quarterly reporting submissions straight from their Monzo account to HMRC in full compliance with MTD rules.

‘Sole traders already work incredibly hard, often at the expense of their own time and wellbeing. With Making Tax Digital coming, we want to make sure people feel supported - not overwhelmed,’ said Jordan Shwide, general manager at Monzo Business.

‘By building a simple tax tool directly into everyday business banking, we’re helping sole traders save hours of admin each month.’

It is important to note that qualifying income for MTD relates to the 2024-25 tax year. Even if an individual’s income has fallen below that level in the 2025-26 tax year, they still must register and file under MTD for Income Tax.

Confusingly, MTD does not replace self assessment tax returns, which will still have to be completed by the usual 31 January 2027 deadline for 2025-26 tax year.