At a recent Propertymark conference, I had an interesting conversation with an exhibitor. Through a Freedom of Information request, they had obtained statistics that suggest only around 25% of the estimated 800,000 taxpayers who will be affected by the next phase of Making Tax Digital (MTD) have registered so far.
While we have not independently verified the figure, it raises an important question: why are so many landlords and self-employed individuals still not prepared for one of the biggest changes to the UK tax system in recent years?
The reality is that many people either do not realise they will be affected or assume they have plenty of time to get ready. Unfortunately, waiting until the last minute could lead to unnecessary stress, disruption and potentially costly penalties.
What Is Making Tax Digital?
Making Tax Digital is HMRC’s long-term plan to modernise the tax system by moving taxpayers away from annual tax returns and towards more regular digital reporting.
From April 2026, self-employed individuals and landlords with qualifying income above £50,000 will be required to comply with Making Tax Digital for Income Tax.
From April 2027, the threshold will reduce to £30,000.
The Government has also announced plans to extend the system further to those earning £20,000 or more from April 2028.
For many landlords and sole traders, this represents a significant change in how they manage their tax affairs.
Instead of keeping records in spreadsheets, notebooks or carrier bags full of receipts, taxpayers will need to maintain digital records and submit quarterly updates to HMRC using compatible software.
Why Are So Many People Unprepared?
In our experience, there are several reasons why landlords and self-employed individuals have yet to take action.
Firstly, many people simply do not realise they fall within the scope of the new rules. A landlord with one or two rental properties may not think of themselves as running a business, yet they could still be required to comply.
Secondly, there remains considerable confusion about what Making Tax Digital actually involves. Many taxpayers assume they will still complete a single annual tax return, unaware that quarterly reporting requirements are being introduced.
Others believe the deadlines are still years away and therefore not an immediate priority. However, the closer we get to implementation, the more difficult it may become to secure advice, select software and establish new processes without pressure.
Finally, some people are understandably reluctant to change systems that have worked for them for many years. If you’ve successfully managed your finances using spreadsheets or paper records, the prospect of moving to digital software can feel daunting.
The good news is that with the right support, the transition is often much easier than people expect.
The Risks of Waiting
One of the biggest mistakes taxpayers can make is assuming they can deal with Making Tax Digital shortly before the deadline.
Leaving preparations until the last minute can create several problems.
You may find yourself rushing to choose software without properly understanding your options. You may discover gaps in your record-keeping processes that take time to resolve. You may also miss opportunities to become comfortable with the technology before quarterly reporting becomes mandatory.
Most importantly, failing to comply with the new requirements could expose you to penalties from HMRC.
The earlier you begin preparing, the smoother the transition is likely to be.
There Are Benefits Beyond Compliance
While Making Tax Digital is often viewed as an administrative burden, there can be significant advantages for those who embrace the changes.
Digital accounting software can provide a clearer view of your financial position throughout the year. Rather than waiting until January to understand your tax liability, you can monitor income, expenses and estimated tax obligations in real time.
Many landlords find that digital systems help them keep better records, reduce errors and save time when preparing information for their accountant.
For self-employed individuals, digital records can provide valuable insights into business performance, helping them make better decisions and identify opportunities for growth.
In many cases, businesses that move to cloud accounting software discover benefits that extend far beyond tax compliance.
What Should You Do Now?
If you are a landlord or self-employed individual, now is the ideal time to assess whether Making Tax Digital will affect you.
Start by reviewing your income levels and understanding when the rules are likely to apply to you. Consider how you currently maintain your records and whether your existing systems will meet HMRC’s requirements.
Most importantly, seek professional advice sooner rather than later.
Preparing for Making Tax Digital is not simply about purchasing software. It is about creating processes that work efficiently for your circumstances and ensuring you remain compliant as the rules evolve.
How Richard Riley & Associates Can Help
At Richard Riley & Associates, we are already helping landlords and self-employed individuals prepare for the transition to Making Tax Digital.
We can help you understand whether the rules apply to you, recommend suitable software, review your current record-keeping processes and guide you through the transition with confidence.
Whilst there may still be many taxpayers who have yet to prepare, there is no reason to be one of them.
The sooner you start planning, the easier the move to Making Tax Digital will be.
If you would like to discuss your Making Tax Digital obligations, contact our team today and we’ll help you put a plan in place before the deadlines arrive.