Roughly half of eligible sole traders and landlords didn’t file their first MTD update. We asked the IPSE how you can avoid joining them.
Key takeaways:
- Only 436,000 of more than 864,000 eligible sole traders and landlords filed their first MTD update, meaning that about half missed the first deadline.
- There are no penalty points for late updates until August 2027 at the earliest, but four points in two years means a £200 fine.
- With the MTD threshold dropping to £30,000 next April, IPSE’s Josh Toovey tells us why getting your records in order now matters more than ever.
Saturday 7th November is the second Making Tax Digital (MTD) deadline, and if HMRC’s estimates are anything to go by, the first one didn’t go well. Of the 864,000 people needed to be on board, only 570,000 signed up, and just 436,000 filed their first update.
New research from tax tech scale-up Taxd suggests the confusion isn’t going away any time soon. Its survey of 2,050 UK adults found 37% think the tax system is unfair to self-employed people, and just 38% say they know a lot about Income Tax.
With the threshold dropping to £30,000 next April, a less prepared, lower-income group is about to join. So what’s at stake if you fall behind, and what steps should you take to X this Saturday’s deadline?
Half of eligible sole traders missed the last MTD deadline
Did you miss the last MTD deadline? If so, you weren’t alone. According to HMRC, roughly half of eligible sole traders and landlords actually filed, leaving at least 428,000 who either hadn’t signed up or didn’t send their first update.
Research from Taxd shows this is part of a wider pattern. According to their survey, four in ten self-employed workers have had something go wrong with their tax in recent years, and 37% think the system is unfair to self-employed people, against just 18% who think it’s fair.
So, what happens if you miss this one? In short, nothing – for now. HMRC has introduced a “soft landing” for the first year of MTD, which means no penalty points are handed out for late quarterly updates due on 7th August, 7th November, 7th February 2027 or 7th May 2027.
But the grace period won’t last. The earliest you could pick up a penalty point is for the April to June 2027 update, if it isn’t filed by 7th August 2027. Each late update after that earns another point, and four within two years means a £200 fine. Points stay on your record for 24 months.
Late payment penalties and interest are separate, and start to bite after the first tax payment under MTD falls due on 31st January 2028.
In other words, this year is a practice run, and those who treat it like one will be in the best position when the points start counting.
What to do before Saturday’s deadline, according to the IPSE
With the next MTD deadline on the horizon, I spoke to Josh Toovey, Head of Policy and Research at IPSE. His main takeaway? Most people have it the wrong way round: sending the update is the easy part, and the real work is getting your records in order beforehand.
“Most people think the hard bit is sending the update, but it’s really about having your records in order beforehand,” he said. “If you’re used to sorting your receipts and invoices in one big go before a deadline, that won’t work any more, because HMRC now wants to see how your year is going every three months.”
– Josh Toovey, Head of Policy and Research at IPSE
That’s good to know if your first update was rushed. “If your first update was a bit rough, this one is your chance to put it right, rather than leaving the mistakes until your tax return in January 2028,” Toovey told me.
He also wants people to check they’re covered. “The limit is based on your total income before costs, not what you actually keep,” he says. And with the threshold dropping to £30,000 next April, “a lot more people are about to get caught.”
Then there’s the Making Tax Digital software, which Toovey says has an upside. It shows a running estimate of what you’ll owe, which means anyone with fluctuating income can “see it coming, so put money aside as you go”, rather than facing a nasty shock in January.
The message from Toovey is clear: the sooner your records are sorted, the less painful every deadline becomes. With Saturday just days away, there’s still time to get yours in order, so here’s how.
Get ahead of this Saturday’s deadline
If you’ve yet to file, or you want to avoid a repeat of August, this four-step checklist will help you get over the line before the 7th of November.
- Check you’re covered: The £50,000 limit is based on your total income before costs, not your take-home. Check whether it applies to you.
- Get your records in order: Log your income and expenses as you go to avoid rushing last minute, and keep personal and business spending separate.
- Pick the right software: Spreadsheet users will need bridging software to send figures to HMRC. Plenty of free MTD software options exist.
- Send, fix and set money aside: Correct any rough figures from your first update, send your quarterly update by Saturday, and use the tax estimate to put money aside.
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