Making Tax Digital for Income Tax became mandatory in April 2026 for sole traders and landlords with qualifying income above £50,000, with the first quarterly update due on 7 August. Much of the coverage in the months leading up to the change focused on the approaching deadline, potential penalties and the need to get accounting software in place. Now that the first filing deadline has passed, there is an opportunity to look more closely at how the process worked in practice for those using it for the first time.
Arjun Kumar is co-founder and co-chief executive of Taxd, an online tax filing service whose work spans MTD for Income Tax, inheritance tax and wealth management for high net worth individuals and limited companies. The Fintech Times put seven written questions to him about what Taxd saw during the first quarter. This article draws on his written answers
The deadline week went much as anyone who has watched self assessment would expect. “We saw a surge in the final week, not surprising, as the majority of people in the UK leave their taxes till deadline week,” Kumar says. What surprised him was what people were asking about. The questions were administrative: whether they were mandated at all, how to connect with HMRC, why their HMRC connection was not showing their property business, how to create a digital link between records. There were few questions about what to include on the return or what could be expensed. For most people, he says, the barrier to MTD is not understanding tax but “understanding the system itself”.
Taxd’s pitch to this title had described the sign up, connect software, then file sequence as broken. Kumar corrects that: the order is right, and the problem is timing. There is often a delay between signing up and seeing MTD obligations appear in the filing software, and that gap leads people to conclude something has gone wrong when the system has simply not caught up. “Our advice is simple, start early, and build in time for processing,” he says. HMRC’s systems are faster than they used to be, but digital, in his words, does not mean instant.
Who is most exposed
On the software confidence gap, Kumar is more optimistic than the framing of the question. The people most exposed by the shift to self-serve bookkeeping, he says, are those who were not already tracking income and expenses in any form. Anyone already using a spreadsheet is ahead, because bridging software asks for little more than the ability to work one. He frames the change as a positive one: everyone should be keeping some kind of digital record of income and expenses in 2026, and MTD is pushing people who were not doing so towards better habits.
The deliberate penalty point, which Taxd had flagged in its pitch as the line that should worry HMRC most, turns out to be a story about incentives. There are no penalty points for a first missed quarterly submission, so for many people the update does not register as urgent. Clients have told Taxd outright that they will deal with it after the summer holidays, because they know there are no points at stake. Kumar expects a second pattern to follow: once someone has taken the point for a quarter, there is no incentive to go back and finalise it, so they move on and file the next update instead. HMRC, he says, should expect that to repeat
unless there is a clearer reason to close out a missed quarter rather than “simply absorb the point and carry on”.
Out of scope without knowing it
Two groups, Kumar says, are trying to comply with a regime that does not yet apply to them. People living abroad see the MTD headlines, work out that their UK income puts them over the threshold and assume they are mandated, without realising that living overseas can take them out of scope in the first year. The same applies to people newly arrived in the UK under the foreign income and gains regime. On top of that there are digital exemptions some people qualify for but do not know exist. “The cost of that confusion is real: people spend time and stress trying to comply with a regime they were never actually required to join,” he says.
Asked what HMRC and the software providers should change before the next quarterly deadline, Kumar’s answer is that the worst is probably over for those who have set up. “Honestly, the hardest part has been getting MTD set up in the first place, and now that most people have done that once, filing itself is actually pretty easy,” he says. “For everyone, Q1 will be the hard one; it gets smoother from here.” Where he wants to see genuine improvement is error handling. If someone hits an HMRC connection problem, or cannot see their property or sole trader business come through, the system should tell them clearly what is happening rather than leave them guessing.
The larger test comes in 2028, when the threshold drops to 20,000 pounds. “Sign-up has to become effortless, and it needs to flow through instantly rather than leaving people waiting to see their obligations appear,” Kumar says. At that level the number of people mandated into MTD rises sharply, and many of them will have far less familiarity with digital record-keeping than the higher earners brought in first. If sign-up is not instant and frictionless by then, he warns, HMRC will face a support surge it will not be able to absorb.
The next quarterly update under MTD for Income Tax, covering 6 July to 5 October 2026, is due by 7 November. The threshold falls to 30,000 pounds from April 2027 and to 20,000 pounds from April 2028.
The post MTD’s First Deadline: The Hard Part is the System, Not the Tax appeared first on The Fintech Times.
