- MTD affects UK SMBs and sole proprietorships that have made more than £50,000 in turnover
- 55%, or 475,000, are still unprepared for the upcoming August 7 submission
- Lloyds warns that many business owners still see it as a major source of confusion
More than half (55%) of UK small businesses affected by the new Making Tax Digital (MTD) for Income Tax rules are not yet fully prepared for the first submission deadline on 7 August 2026, new research has claimed.
Using HMRC estimates, Lloyds Bank warns that this could represent almost half a million (475,000) sole traders, landlords and small businesses.
The first cohort of taxpayers to follow HMRC’s new MTD rules will be those with an annual turnover of at least £50,000, with subsequent years affecting workers with an income of £30,000 and then £20,000.
UK SMBs not ready for MTD next month
Making Tax Digital’s requirement for more annual filings came into effect this tax year, beginning April 6, 2026, but taxpayers affected by the changes have not had to file anything yet. But with the first deadline of August 7 fast approaching, this Lloyds data paints a worrying picture.
While the initial setup can be daunting for many taxpayers, those who have already adopted MTD’s principles report significant benefits. Two in five (40%) said digital tax management made them more organised, and almost one in three (28%) agreed it reduced the stress of last-minute tax administration.
Taxpayers also worry that HMRC’s communication has been unclear so far – while the benefits of digital filing are widely recognised, many are unsure what action to take before the first deadline.
“Making Tax Digital represents one of the biggest administrative changes many sole traders will have experienced in years,” wrote Head of Business Banking Ramki Sankaranarayan.
Eligible Lloyds Business Account customers can access the company’s MTD functionality for free, with the banking giant becoming the latest in a growing number to try to handle some bookkeeping tasks in-house. For many, dedicated accounting software still offers greater functionality around other accounting, but the growing availability of hassle-free, built-in tools promises to reduce the likelihood of receiving fines as MTD becomes more widespread.
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