MoneyWeek article: First Making Tax Digital deadline, are people prepared?

As both an adviser and small business owner, I am ready, but I do not think the wider market is. The danger is that people have bought software and mistaken that for preparation. We have moved our bookkeeping onto compatible software, separated transactions properly, tightened receipt capture and made monthly reconciliation routine rather than a January rescue mission.

The software is the easy part; changing behaviour is harder. Landlords with multiple properties, mixed personal and business spending or agents paying costs on their behalf are most exposed. The first update may be light-touch, but submitting poor data and hoping to repair it later defeats the purpose.

Done properly, MTD should improve cash-flow visibility and tax planning. Done badly, it will replace one annual panic with four smaller panics.

More than 860,000 sole traders and landlords are in this first wave. We are ready, having started early.
We began by re-checking every client's 2024-25 turnover to see who is caught. The software is not what trips people up, not knowing the eligibility test applies to you is. Whether you are caught was decided by your 2024-25 return, the one filed last January, measured on turnover before expenses, with self-employment and property added together. HMRC's own example: £25,000 of rent plus £27,000 of self-employment is £52,000, so on that basis you are in, even if profit is far lower. Making Tax Digital catches you on what you turned over, not on what you live on. The first update covers 6 April to 5 July, due by 7 August. It is a summary, not a mini tax return: no tax to pay, and cumulative, so a later update fixes an earlier one. There are no penalties for a late quarterly update in 2026-27. So check the turnover on your 2024-25 return before the August deadline!

Making Tax Digital may sound neat in Whitehall, but for many accidental landlords and small business owners it feels like a compliance treadmill designed by people who have never filed a tax return after a long day’s work. Quarterly updates, digital records and software costs may be manageable for accountants, but they are a big ask for people with one rental property or a modest sideline income. The risk is that ordinary taxpayers spend more time learning systems than running their affairs. HMRC should be helping people get tax right, not turning occasional landlords into unpaid bookkeepers.

"It was pretty painless" is the story I'm hearing from most freelancers doing their first quarterly MTD report. The anxiety around getting things setup, registered, doing the admin and submitting things might be larger than the task itself. However, this first round of people in MTD, who don't have penalties applied, and are more likely to have accounting support are not the true litmus test. When the threshold drops to £30k next year, it will affect many who have been pushed into self-employment, and may not be able to easily afford software, accounting advice or the time to do more frequent admin. HMRC will need to be on hand to support those who need the most support