The verdict from tax advisers on the first quarterly submission for MTD income tax are in – and the picture is mixed.

MTD income tax is the biggest change to personal taxes since the introduction of self assessment 30 years ago, so it is perhaps no surprise that there have been teething problems. 

HMRC spent the months in the run up to the deadline speaking to taxpayers and advisers about preparations for MTD income tax, but a lot of practitioners were wary coming into the first quarterly submission, says ICAEW’s Senior Tax Technical Manager, Lindsey Wicks.

“There had been a pilot for MTD income tax, but it wasn't at scale and it wasn't all software products. So practitioners were worried about whether the systems would hold up when they were used at scale. They were worried about getting client information, and they also thought that HMRC was underestimating how much work was needed.”

Clients and capacity create challenges

A survey by Accountants Therapy (a peer-led support community) with 142 respondents found that only 48 managed to submit 100% of their clients’ quarterly reports on time. Others came up against barriers, with the biggest obstacles being:

• getting information from clients (67%);
• practice capacity (46%); and
• general digital record keeping (29%).

“For the VAT-registered clients, they are used to digital record keeping which they've had to do for a few years plus quarterly VAT submissions, but for others it will be new,” says Wicks. “I have seen comments on forums, for example, where accountants have been frustrated because they haven't got the records. One said that their client said, ‘I'll get back to you after my busy period’. So I think the message hasn't necessarily got through to all clients.”

Practice capacity issues could stem from accountants and bookkeepers wanting to ensure that client accounts for the prior year were reconciled and ready before putting together the first quarterly submissions. That meant having to do all of the accounting work for 2025/26 for those clients on top of the first quarterly report. Wicks says: “Normally you have up to 10 months after the end of the tax year to submit that self assessment return. MTD has brought forward that work.”

Some bugs to iron out

Technology issues occurred on both the HMRC and software sides of the process. One-third of respondents had problems that they believed were HMRC-related, while 19% had problems related to software that led to non-filing. Practitioners reported glitches when it came to update period dates, and issues with matching national insurance numbers. Some software also struggled to deal with all income types.

Some practitioners may need to switch software providers or wait for software updates before the next submission deadline, according to Wicks. She says: “There are other issues in terms of software connecting to HMRC systems, as well as the time it takes to authorise new clients. If you're waiting for things to be processed, there will be a few client authorisations that didn't happen in time to meet that 7 August deadline.”

Practitioners are not feeling confident

The number of respondents saying MTD was a bad idea went up from 53% before the Q1 submission to 64% afterwards. Around three-quarters said MTD was not a good use of their time for their own business, and 73% said it wasn't a good use of their time for their clients.

“ICAEW has consistently supported the overall aim of digitalising the tax system, but we've always been opposed to the mandatory quarterly update element of Making Tax Digital,” confirms Wicks. “Our view is that quarterly updates add complexity and costs with little tangible benefits to taxpayers or HMRC, and in some sense, this first quarter has borne that out.”

Just 25% of those surveyed by Accountants Therapy said that they’d fully covered their time through the fees they charged. This may be down to the newness of the process, says Wicks, with more upfront work required to set everything up. “It could be one off, but I think there is a sense that generally it's going to cost more; you're going to be contacting your clients more, and every time you're making contact, that's time spent,” she says.

When asked to rate their confidence out of 10 that MTD will speed up the year-end process, this averaged at 4.5 out of 10.

On the other hand, the vast majority of respondents were able to get the bulk of their submissions on time – 71% managed to get at least 86% of submissions in on time. Just 5% submitted less than 25% of their Q1 obligations. One-fifth (20%) found it easier to complete than expected, and 41% said it was as expected, while 39% found it harder to complete than they thought it would be.

Next steps

HMRC will start signing up mandated taxpayers from September if they haven’t already signed up. Practitioners are expecting the upcoming busy period to be particularly busy, with the deadline for Q3 submissions just days after the usual self assessment deadline in January.

ICAEW is keen to hear from members about their experiences with MTD income tax, to help inform recommendations to HMRC. You can get in touch via taxfac@icaew.com. More support can be found through ICAEW’s Making Tax Digital hub, as well as HMRC’s agent toolkit, which includes a link to sign up for group sessions to enable discussion directly with HMRC.