More than 580,000 people who should have registered for Making Tax Digital (MTD) have failed to do so, according to documents obtained by accountancy and business advisory group Azets.
HMRC data shows that 864,000 individuals and landlords should have registered for MTD for income tax by 6 April this year, but as of 20 May just 282,637 had signed up, HMRC said in response to a freedom of information request.
Fraser Campbell, UK head of accounts & business advisory services at Azets, said: “MTD for income tax represents the most significant change in the personal tax system in nearly 30 years – but two-thirds of those who should be registered aren’t.
“There are a multitude of reasons why people may not have signed up – they may not be aware of the changes, they may have simply forgotten about it or they may be in denial that they need to register. Whatever their reason, not signing up creates potential problems in the future.
“HMRC has said there are no penalties for missing a quarterly return date for this year, but people are setting themselves up for stress, trouble and, potentially, fines by not taking action to register and keep up to date with the quarterly filings now.”
The tax office requires an end of tax year declaration which requires the data from the four quarters to be aggregated.
Mr Campbell adds: “By not registering now and by delaying it further, anyone who is in scope of MTD will need to catch up with this year’s four filings at the same time as next year’s quarterly filings become due, as well as their annual declaration, so they’ll have to potentially file nine returns over the same 12-month period.”
The introduction of MTD this April brought the personal tax system closer to real-time and is expected to affect 2.9m people by 2028.
It introduced quarterly digital record keeping and reporting obligations for hundreds of thousands of landlords, sole traders and the self-employed, who previously only had to submit one tax return a year.
Following its introduction, qualifying individuals and businesses have been required to keep digital records, use MTD-compatible software and submit updates every quarter, as well as a final declaration.
The final declaration replaces the existing self-assessment tax return and can only be submitted using MTD compatible software.
Taxpayers will no longer be able to file using HMRCs self-assessment portal.
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