- MTD affects UK SMEs and sole traders who made more than £50,000 in revenue
- 55%, or 475,000, are not yet ready for the next presentation on August 7.
- Lloyds warns many business owners still see it as a major source of confusion
More than half (55%) of British small businesses affected by the new Making Tax Digital (MTD) income tax rules are still not fully prepared for the first filing deadline of 7 August 2026, new research claims.
Using HMRC estimates, Lloyds Bank warns that this could represent almost half a million (475,000) sole traders, proprietors and small businesses.
The first cohort of taxpayers forced to follow HMRC’s new MTD rules will be those with an annual income of at least £50,000, with subsequent years affecting workers with an income of £30,000 and then £20,000.
UK SMEs unprepared for next month’s MTD
Making Tax Digital requirements for multiple annual filings went into effect this tax year, beginning April 6, 2026; However, taxpayers affected by the changes have not needed to file anything yet. But with the first deadline of August 7 fast approaching, this data from Lloyds paints a worrying picture.
While the initial setup may be daunting for many taxpayers, those who have already adopted MTD principles report significant benefits. Two in five (40%) said digital tax management made them more organized, and almost one in three (28%) agreed it reduced last-minute tax administration stress.
Taxpayers are also concerned that communications from HMRC have been unclear so far: while the benefits of digital record-keeping are widely recognised, many are unsure what action they should take before the first deadline.
“The digitization of tax represents one of the biggest administrative changes that many sole traders will have experienced in years,” wrote head of business banking Ramki Sankaranarayan.
Eligible Lloys Business account customers can access the company’s MTD functionality for free, with the banking giant becoming the latest in a growing number trying to solve some accounting tasks in-house. For many, dedicated accounting software still offers greater functionality around the maintenance of other financial records, but the increasing availability of integrated, hassle-free tools promises to reduce the likelihood of receiving penalties as MTD becomes more widespread.
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