From 6 April, anyone who earned more than £50,000 in the 2024/25 tax year from property or self-employment income was required to use authorised software to keep digital records and send HMRC quarterly updates on their income and expenses. Eight days after the deadline, three quarters had not signed up, with only 218,000 out of the required 864,000 doing so, according to figures provided to the FT by HMRC. This is done as part of the department's Making Tax Digital for Income Tax scheme.
In November, HMRC wrote to affected taxpayers, saying they would need to sign up and be ready to use the service from the start of the current tax year. Despite the deadline, HMRC said it will not apply penalties on those who failed to register by the date. HMRC has used paid advertising, including on social media and through influencers, as well as sending letters to affected taxpayers to inform people of the shakeup, but did not disclose the budget of the campaign.
We are encouraging all customers who were required to sign up by April 6 to do so as soon as possible and expect sign-ups to rise through the first quarter in advance of the first quarterly update deadline on August 7. The pace of sign-ups is following an expected trajectory informed by our experience of successfully launching MTD for VAT.
Under the rollout of the new system sole traders and landlords have until August before their first quarterly update is due, with the penalty regime for late filing triggered after this. The reforms have been viewed as the largest changes to tax since self-assessment was introduced nearly three decades ago as part of government efforts to close the tax gap. The measures will affect a wider consumer base over the next three years, with those earning more than £30,000 a year brought into reporting obligations from April 2027.
From April 2028, those earning more than £20,000 will also be brought into the net.