{"id":2182225,"date":"2026-11-05T10:43:49","date_gmt":"2026-11-05T10:43:49","guid":{"rendered":"https:\/\/www.thebusinessdesk.com\/northwest\/?p=2182225"},"modified":"2026-11-05T10:43:49","modified_gmt":"2026-11-05T10:43:49","slug":"making-tax-digital-drive-is-failing-to-convince-smes-says-tax-tech-body","status":"publish","type":"post","link":"https:\/\/www.thebusinessdesk.com\/northwest\/news\/2182225-making-tax-digital-drive-is-failing-to-convince-smes-says-tax-tech-body","title":{"rendered":"Making Tax Digital drive is failing to convince SMEs, says tax tech body"},"content":{"rendered":"<p><span style=\"font-weight: 400\">HM Revenue &amp; Customs\u2019 Making Tax Digital drive is proving problematic for small businesses, new research shows.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">In one of the biggest administrative shake-ups affecting SMEs in years, sole traders and landlords earning more than \u00a350,000 from their self-employment and property had to send their first Making Tax Digital (MTD) for Income Tax quarterly update by August 7, 2026.<\/span><\/p>\n<p><span style=\"font-weight: 400\">MTD will extend to those earning more than \u00a330,000 from April 2027, and to those earning more than \u00a320,000 from April 2028.<\/span><\/p>\n<p><span style=\"font-weight: 400\">HMRC said <\/span><span style=\"font-weight: 400\">no penalty points will be issued for late quarterly updates during the first year of MTD for Income Tax, although penalties do still apply for late self assessment returns and late payments.<\/span><\/p>\n<p><span style=\"font-weight: 400\">From the second year of MTD for Income Tax onwards, points-based penalties will apply where taxpayers miss a quarterly deadline.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Taxpayers receive one penalty point for each missed quarterly deadline. Once four points are accumulated, a \u00a3200 fixed penalty is charged. Points expire after a period of compliance.<\/span><\/p>\n<p><span style=\"font-weight: 400\">This Saturday (November 7) is the second Making Tax Digital deadline, and it appears the first one didn\u2019t go well.<\/span><\/p>\n<p><span style=\"font-weight: 400\">HMRC reckoned 864,000 people needed to be on board with MTD.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Around 570,000 signed up and only 436,000 filed their first update.<\/span><\/p>\n<p><span style=\"font-weight: 400\">HMRC put out \u2018myth-busting\u2019 guidance this week built from the chaos of August, so people are clearly still confused, says Taxd, a tax tech scale up with 20 000 customers, which has research pointing to why it&#8217;s not getting better any time soon for SMEs:<\/span><\/p>\n<ul>\n<li><span style=\"font-weight: 400\">More than four in ten adults have already had something go wrong with their tax, like an overpayment, an underpayment, a missed relief or a mistake on a Self Assessment return<\/span><\/li>\n<li><span style=\"font-weight: 400\">37% say the tax system is unfair to self-employed people, and only 18% say it\u2019s fair<\/span><\/li>\n<li><span style=\"font-weight: 400\">Just 38% say they know a lot about Income Tax<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Taxd is HMRC-recognised and supports more than 20,000 users, mostly sole traders, landlords and freelancers.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">Its report also draws on HMRC\u2019s own tax gap figures.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Small businesses account for 62% of the gap, and failing to take reasonable care is the biggest single cause at 35%.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">MTD was meant to fix exactly that, but this year\u2019s penalty pardon\u00a0 is hiding the problem rather than solving it, said Taxd.<\/span><\/p>\n<p><span style=\"font-weight: 400\">It warns next April brings in a less prepared, lower-income group.<\/span><\/p>\n<p><span style=\"font-weight: 400\">Arjun Kumar, co-founder of Taxd a<\/span><span style=\"font-weight: 400\">nd a former PwC tax manager, said: <\/span><span style=\"font-weight: 400\">&#8220;MTD was built to fix one specific problem.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cHMRC&#8217;s own tax gap figures put small businesses at 62% of the gap, and the single biggest cause is failing to take reasonable care.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cQuarterly digital records were meant to be the answer to that. Year one isn&#8217;t getting there.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400\">He added: \u201cHMRC contacted 864,000 people to tell them they were in scope.<\/span><\/p>\n<div id=\"attachment_2182227\" style=\"width: 381px\" class=\"wp-caption alignleft\"><img decoding=\"async\" aria-describedby=\"caption-attachment-2182227\" class=\" wp-image-2182227\" src=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/nov_26\/Arjun-Kumar-Taxd-e1793875184336-300x246.png\" alt=\"\" width=\"371\" height=\"304\" srcset=\"https:\/\/www.thebusinessdesk.com\/_files\/images\/nov_26\/Arjun-Kumar-Taxd-e1793875184336-300x246.png 300w, https:\/\/www.thebusinessdesk.com\/_files\/images\/nov_26\/Arjun-Kumar-Taxd-e1793875184336-200x164.png 200w, https:\/\/www.thebusinessdesk.com\/_files\/images\/nov_26\/Arjun-Kumar-Taxd-e1793875184336.png 345w\" sizes=\"(max-width: 371px) 100vw, 371px\" \/><p id=\"caption-attachment-2182227\" class=\"wp-caption-text\"><strong>Arjun Kumar<\/strong><\/p><\/div>\n<p><span style=\"font-weight: 400\">\u201cMore than 570,000 signed up. More than 436,000 filed the first update in August.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cThe space between those three numbers is mostly confusion about who the rules apply to, not people refusing to file.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400\">He acknowledged: \u201cThe soft landing on penalty points is good in theory.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cWhat was missing in the first quarter is what HMRC is doing now, writing to people and signing them up automatically.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cThat should have happened before August.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cInstead a chunk of the first cohort went into the system late, or hasn&#8217;t gone in at all, and the quarter they were meant to learn on has already passed.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cThe other block is simpler than policy.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cPeople don&#8217;t understand what they&#8217;re actually being asked to do.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cWhether to connect a bank account. What software counts. Whether a quarterly update means paying HMRC early.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cNone of that is clear to someone running a business on their own, so they put off engaging with MTD altogether and the deadline arrives with nothing filed.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400\">He said: \u201cOur research shows how little the base knowledge is there.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cOnly 38% of UK adults say they know a lot about Income Tax. More than four in ten have already had something go wrong, an overpayment, an underpayment, a missed relief or a mistake on a return.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cAnd 37% think the system treats self-employed people unfairly, against 18% who think it&#8217;s fair.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cThen April 2027 lands and the threshold drops to \u00a330,000.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cA bigger, lower-income group joins, with less admin support and no easement at all, sitting on top of a first cohort that was never taught the habit.<\/span><\/p>\n<p><span style=\"font-weight: 400\">\u201cHMRC is holding the bill until it&#8217;s bigger.&#8221;<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>First Making Tax Digital deadline appears not to have gone well<\/p>\n","protected":false},"author":217725,"featured_media":2110947,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[120667],"coauthors":[46761],"class_list":["post-2182225","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-smes","tag-featured-story","tag-northwest"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Making Tax Digital drive is failing to convince SMEs, says tax tech body<\/title>\n<meta name=\"description\" content=\"First Making Tax Digital deadline appears not to have gone well\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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