Background
Making Tax Digital for Income Tax (MTD ITSA) was first scheduled for implementation in April 2018 but has been discussed and delayed several times since then. Despite the delays, taxpayers have now experienced their first quarter of digital reporting which began in April 2026.
Keeping digital records is only a part of the obligation that relevant taxpayers now have. Once the quarter is completed, taxpayers have one month to file their MTD submission to HMRC. For the first quarter, this deadline was 7th August 2026. Whilst the reporting figures have not yet been released by HMRC, it is widely expected that a number of submissions will be received after the deadline or not at all.
Detail
There will always be some taxpayers who are against MTD and are reluctant to make digital submissions however the vast majority have been engaging with accountants and making the effort to comply with their new obligations. Unfortunately, however, many have encountered issues with their first submission despite their best efforts.
We have seen reports of filings being rejected because HMRC have issued a request for the wrong tax year, we have experienced error messages coming from submissions and taxpayers have been required to become familiar with one, two and in some cases, three new types of software in order to make these quarterly reports.
Whilst extensive testing has been carried out over the last few years to try and ensure a smooth transition into digital reporting, many accountants have been concerned that it would not be the case. Testing was restricted to a small number of taxpayers and the first threshold has brought an estimated 864,000 taxpayers into quarterly reporting from April 2026, with an estimated total of 3 million taxpayers being brought in by April 2028.
With this number of submissions being made, teething problems were to be expected and HMRC have given a temporary “soft landing” in relation to late filing penalties for the 2026/27 quarters. This gives taxpayers a chance to become familiar with their obligations but more importantly allows HMRC and software providers to work through the issues cropping up. Taxpayers are advised that even though no late filing penalties will be issued, the quarterly submissions should still be submitted and this grace period is limited to the quarterly reporting only, so the final declaration will be subject to penalties if submitted late.
If you require any assistance in meeting your MTD obligations or if you believe you may have missed the first reporting deadline, please speak to your usual contact or our Tax Director, Jenny Marks.
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