Surrey-based accountancy firm TWP Accountants is raising concerns over a widespread lack of awareness around Making Tax Digital (MTD), with key deadlines now less than a year away.

From April 2026, self-employed individuals and landlords with an annual income exceeding £50,000 will be required to maintain digital records and submit quarterly updates to HMRC via MTD-compatible software, under the MTD for Income Tax regime.

However, recent research by QuickBooks reveals that one in five affected individuals remain unaware that these new requirements apply to them.

“The number of sole traders who are still blissfully unaware that they must comply with MTD regulations by next April is frankly alarming,” said Paul Hawksley, Managing Partner at TWP.

“We believe this is partly due to a lack of clear guidance and consistent communication from HMRC, leaving many individuals uncertain about the practical implications of the changes.”

The £50,000 threshold applies per individual, not per source, which is where some of the confusion lies.

“For example, if someone earns £30,000 from self-employment and £25,000 from rental property, they will be required to comply with MTD from April 2026, as their combined qualifying income is £55,000.

“Those with total income between £30,000 and £50,000 will be phased into the regime from April 2027, giving them more time to prepare.”

Failure to comply with MTD could lead to a number of penalties and increased scrutiny.

“What many people don’t realise, is that failing to keep digital records or missing quarterly submission deadlines could trigger late filing penalties, accrue interest on unpaid tax, and potentially result in additional attention from HMRC,” Paul continued.

“HMRC operates a points-based penalty system for MTD. Each missed deadline results in a penalty point, and once a threshold is reached, which will be determined by your filing frequency, a £200 penalty is issued. If you then continue to miss deadlines, you’ll be subjected to further penalties.”

Points are assigned per obligation, meaning different types of returns (such as VAT and Income Tax) are tracked separately.

While multiple missed submissions for the same obligation in a single month usually count as one point, repeated non-compliance can quickly become costly.

Failing to meet the requirements of the MTD regime can also harm a business’s reputation, erode trust with stakeholders, and even threaten its viability.

Fortunately, there is still time to ensure your business is ready ahead of the April 2026 deadline.

“There are many MTD-compliant software solutions available, and in some cases, businesses may already be using compatible providers without realising it,” said Paul.

“To qualify as compliant, the software must be capable of preserving digital records, generating tax returns from those records, submitting them to HMRC via digital link, and receiving HMRC updates through its API platform.”

TWP recommends speaking to your accountant to confirm whether your current software meets MTD requirements or if you need to invest in a new provider.

“We understand that every business has unique needs, which is why we offer tailored advice to help clients choose the most appropriate solution to meet both their compliance obligations and operational goals.”

If you are a sole trader and would like expert, personalised advice on how to prepare for MTD, contact TWP Accountants.