Over 400,000 Small Businesses Miss First Making Tax Digital for Income Tax Deadline
By Lauren Towner · 14 August 2026
In brief: HMRC reports that over 400,000 small businesses missed the first Making Tax Digital for Income Tax deadline on August 7th, with mandatory fines set to begin in April 2027.
| Missed Deadline Count | 400,000 |
|---|---|
| First Deadline Date | Friday 7th August |
| Next Deadline Date | 7th November |
| Income Threshold | £50,000 |

Quick Summary
HMRC figures reveal that over 400,000 small businesses and landlords missed the first Making Tax Digital for Income Tax deadline on August 7th. While a soft landing period currently waives penalty points for late quarterly updates, mandatory fines will be introduced starting April 2027.
How does Making Tax Digital for Income Tax affect small businesses?
Making Tax Digital for Income Tax represents a significant shift in how sole traders and landlords manage their tax obligations. Currently, individuals with a qualifying income of more than £50,000 in the 2024/25 tax year are legally required to follow these new rules. The system mandates digital record-keeping and quarterly tax submissions, moving away from the traditional annual filing process. According to HMRC, out of 864,000 people due to submit their first update, only 436,000 met the August 7th deadline.
- Qualifying income threshold: £50,000 for 2024/25
- Next quarterly deadline: November 7th
- Penalty introduction: April 2027
What should businesses do if they missed the first MTD deadline?
Businesses that missed the initial deadline should take immediate steps to achieve compliance. Emily Coltman FCA, Chief Accountant at FreeAgent, advises that taxpayers should register for the scheme, select HMRC-compatible software, and complete their first submission as soon as possible. While HMRC has implemented a soft landing period for the 2026/27 tax year where penalty points for late quarterly updates are waived, there is no such grace period for late annual final declarations.
“This is a legal requirement, and those 400,000 people cannot ignore the new Making Tax Digital for Income Tax system, however much they may wish they could,” said Emily Coltman FCA, Chief Accountant at FreeAgent. The scope of the mandate is set to expand next year to include those earning £30,000 or more, making early adoption critical for long-term compliance.
FF NEWS TAKE:
The fact that nearly half of the eligible population missed the first Making Tax Digital for Income Tax deadline is a wake-up call for the UK's digital transformation agenda. While the soft landing period provides a necessary buffer, the sheer volume of non-compliance suggests that many sole traders and landlords remain unprepared for the transition to quarterly reporting. This move definitely moves the needle by forcing a massive shift toward real-time accounting software, but the friction of adoption remains high.
Frequently asked questions
How many businesses missed the first Making Tax Digital for Income Tax deadline?
According to HMRC figures, more than 400,000 sole traders, landlords, and small business owners missed the first filing deadline on August 7th. Out of 864,000 people due to submit their first quarterly update, only 436,000 did so on time.
When do penalties start for Making Tax Digital for Income Tax?
HMRC has introduced a one-year soft landing period for the 2026/27 tax year, meaning penalty points for late quarterly updates will not be issued during this time. However, mandatory fines will be introduced starting from April 2027.
Who is currently required to use Making Tax Digital for Income Tax?
Currently, sole traders and landlords who earned a qualifying income of more than £50,000 in the 2024/25 tax year are required by law to adhere to MTD rules. This includes digital record-keeping and quarterly tax submissions.
About the companies
Institute of Chartered Bookkeepers
1 story on FF News since 2026
Companies in this story: Institute of Chartered Bookkeepers, Ulster Bank, NatWest, HM Revenue & Customs, Royal Bank of Scotland, Mettle, FreeAgent
People in this story: Emily Coltman, Jessica Keough