Extend MTD penalty relaxation to help over one million additional taxpayers, says ATT

9 September, 2026

The Association of Taxation Technicians (ATT) has called on the government to extend Making Tax Digital (MTD) penalty easements to taxpayers joining the regime in April 2027, warning that more than one million lower-income sole traders and landlords may otherwise face an unnecessarily difficult transition.

In a submission ahead of next month’s Budget, the ATT argues that the second wave of taxpayers entering MTD next year should benefit from the same soft landing currently available to those who joined in April 2026.

Under current rules, taxpayers in their first year of MTD are protected from penalty points for late filing of quarterly updates, but only if they joined in 2026/27.

HMRC estimates that a further 1.077 million taxpayers will be brought into MTD from April 2027. According to official statistics, they are less likely to already use accounting software and less likely to have professional representation than the first group brought into the regime.

Emma Rawson OBE, ATT Director of Public Policy, said:

"Making Tax Digital represents one of the biggest changes to the UK tax system for a generation. While we support the move towards digital record-keeping and recognise the long-term benefits it can bring, many taxpayers joining MTD next year will be starting that journey from a very different position.

"Our members have been working incredibly hard to support clients through the first phase of implementation and have highlighted the challenges involved in helping people adapt to new digital record-keeping and reporting requirements. Those concerns are likely to become even more acute next year, when many of the taxpayers entering MTD are expected to have lower incomes, less experience of using software and less access to professional advice.

"Extending the current penalty easement would be a fair and proportionate step. It would give taxpayers time to understand the new system, get the right support in place and adjust to quarterly reporting without the worry of penalties during the transition."

Official figures published after the first quarterly filing deadline in August showed around 436,000 successful submissions from an estimated population of 864,000 taxpayers required to join MTD this year.

While many taxpayers are still becoming familiar with the system, the figures underline the scale of the challenge involved in such a significant change.

Notes for editors:

  1. ATT Budget submission: Extension of MTD penalty soft landing.
  2. HMRC: 436,000 sole traders and landlords make their tax digital.