HMRC's Making Tax Digital: 94% of UK Businesses Unprepared for 2026 Launch
A startling new survey of UK businesses has revealed that an overwhelming 94 per cent are unprepared for the imminent introduction of Making Tax Digital (MTD), HMRC's landmark overhaul of the tax system set to commence on April 6, 2026. The research, conducted by accountancy and business advisory firm Azets, indicates a widespread lack of readiness for what is being described as the most significant change to tax administration in nearly three decades.
Quarterly Digital Submissions Replace Annual Returns
The core of the MTD regime requires individuals and businesses who currently complete their own tax returns to transition from a single annual calculation to a system of quarterly digital updates, followed by a final end-of-year declaration. This shift mandates the maintenance of digital records and the use of MTD-compatible software, fundamentally altering long-established accounting practices.
"The online poll showed overwhelmingly that the majority of businesses are simply not ready for MTD," stated Fraser Campbell, UK Head of Accounts and Business Advisory Services at Azets. "I was alarmed that more than 63 per cent of respondents were not prepared at all, while another 31 per cent have simply 'started preparing'. Less than six per cent reported that they were ready for the introduction of MTD, which is worrying given its significance. Time is of the essence."
Phased Rollout to Affect Millions
The initial phase of MTD for Income Tax will apply from April 2026 to:
- Landlords
- Sole traders
- The self-employed
with a gross annual income exceeding £50,000. This threshold is scheduled to be progressively lowered, expanding the scheme's reach dramatically:
- April 2027: Threshold drops to those earning over £30,000.
- April 2028: Threshold further reduces to those with income above £20,000.
This phased approach means the system will initially impact an estimated 864,000 individuals and landlords, with that figure projected to surge to approximately 2.9 million within three years as the income criteria are broadened.
Business Concerns and Potential Benefits
The Azets survey also explored the primary concerns businesses harbour regarding the new system. Key anxieties identified include:
- Over 37% of participants expressed difficulty understanding what specific information needs to be reported.
- 25% cited a lack of knowledge about the precise compliance requirements.
- Over 21% highlighted the challenge of selecting appropriate, MTD-compatible software.
Despite these challenges, Fraser Campbell pointed to the potential long-term advantages of the digital transition. "While MTD will mean changes in processes and software, the switch will also bring advantages for individuals with access to near real-time information and insight about their businesses, cash flow, income, and taxes for the first time," he explained.
Campbell emphasised the critical need for professional guidance: "Getting the right advice from the right people will help those who are in scope of it be ready and confident for its introduction – whether they're affected by the changes this April, or in the years that follow." Azets, which specialises in advising SMEs, has established a dedicated MTD portal to provide businesses with necessary guidance and support.
The message from the business advisory sector is unequivocal: with the April 2026 deadline fast approaching, affected businesses and individuals must act immediately to develop and implement compliant digital processes to ensure a smooth transition into this new era of real-time tax administration.
