HMRC’s Making Tax Digital for Income Tax (MTD ITSA) program has crossed the 219,000 registrations milestone out of 780,000 self-employed workers and landlords affected by the first wave, representing approximately 28% adoption. In February 2026, this figure stood at just 37,000. The progression is clear, but with four months remaining until the first quarterly deadline, over 560,000 taxpayers still haven’t made the transition (The Register, April 10, 2026).
Context: A Five-Time Delayed Program Finally Launched
MTD for Income Tax went live on April 6, 2026 for gross income above £50,000. The program, originally planned for 2018, was postponed five times — pandemic, technological unpreparedness, accounting sector resistance. This time, the launch is effective: affected taxpayers must keep digital records and submit quarterly updates via HMRC-compatible software, replacing the annual Self Assessment return.
HMRC stated that MTD will “make it easier for self-employed individuals and landlords to manage their tax by giving them a closer-to-real-time view” (The Register, April 10, 2026).
Concrete Impact for CIOs and CFOs
Timeline and Costs to Anticipate
The first quarterly submission is set for August 7, 2026. HMRC confirmed that no penalties will be applied during the 2026/27 tax year — reminder letters will be sent instead. From 2027/28 onwards, four late submissions will result in a £200 fine.
Budget-wise, HMRC estimates the adoption cost at approximately £350 for initial setup and £115 annually for compatible software. These figures remain government estimates — actual cost will depend on the chosen software and complexity of income to declare.
Two Additional Waves Coming
The MTD ITSA scope will expand rapidly:
- April 2027: threshold lowered to £30,000 gross income, adding approximately 970,000 additional taxpayers
- April 2028: threshold lowered to £20,000, adding approximately 975,000 additional taxpayers
In total, nearly 2.7 million people will be affected by 2028. For ERP vendors and accounting firms operating in the UK, the preparation window for the second wave is already shrinking.
What This Means for ERP Systems
Any accounting or ERP software used by self-employed individuals and landlords in the UK must now be MTD ITSA compliant. This involves:
- Digital record keeping: data must be recorded digitally, without manual re-entry between systems
- Quarterly submission via HMRC API: software must connect to HMRC’s MTD API to transmit income and expense summaries
- End of Period Statement: an annual end-of-period statement replaces the traditional Self Assessment
Vendors like Sage, Xero, QuickBooks, FreeAgent, and Iris have already certified their solutions. Companies using sector-specific ERPs or custom solutions must verify compatibility — or plan for a bridging module.
What to Watch
The 28% adoption rate six weeks after the effective launch remains modest. HMRC is banking on the absence of penalties in the first year to smooth the transition, but the real test will come with the second wave in April 2027: one million additional taxpayers with lower income thresholds and likely less appetite for digitalization. UK accounting firms, already under pressure, will be first to absorb the shock.
For further reading, see our complete guide on Making Tax Digital and our UK ERP market overview.
