HMRC’s Making Tax Digital Initiative Falls Short of Expectations

Tax Tally Tango: Why HMRC’s Making Tax Digital (MTD) Might Be a Fumble

Pointless So Far? Let’s Take a Spin

“Under MTD, self‑employed folks and businesses will have to report every three months instead of once a year.” – Fiona Fernie, Partner, Blick Rothenberg. That’s like turning a smooth cruise into a bumpy bumper‑car ride without any extra destination perks.

In theory, MTD ought to help you keep a closer eye on your finances, signal you when you’re straying off track, and cut down on paperwork. But, as Fiona points out, “you can already get that from a trusty spreadsheet and the old Government Gateway.” He’s right: the modern “digital” version just adds a subscription to a software platform, costing mainly what you’d otherwise pay for taxes.

What Does MTD Do Exactly?

Quarterly Reports – Your tax returns go in every three months.
No Change in Liability – How much you owe remains the same.
Paying the Software Bill – No free‑bie, you pay for a third‑party tool.

“This Is a Try, Not a Triumph”

HMRC’s own notes claim that MTD brings “benefits, better data, and simple filing.” Yet, if you use a modern spreadsheet or the free Gateway, you’re still basically doing what you were doing before. Add a software subscription, and you’re basically paying for coffee that you’re already having.

Performance Claims Without Proof

Reduced Admin Time? – The data doesn’t show you actually saved hours.
Better Accuracy? – Mistakes happen whether you’re typing into Excel or MTD.
Confidence Boost? – People can feel confident with any system as long as they do it right.

Leading Voices Say No

Even the Institute of Chartered Accountants in England and Wales (ICAEW) has said that the tech overhaul is more hassle than help for small businesses. They’ve urged HMRC to rethink the quarterly push and to make it easier for people to actually report their taxes without a cost‑overrun.

Why It Feels Uneasy

Extra Burden – More returns = more headaches.
Hidden Costs – MTD software starts at £150/year plus training fees (~£330).
Revenue Alarms – From April 2026, firms earning >£50k must start this regime; by 2028, £20k upgoers hop aboard.

What the Taxpayers Charter Really Says

The charter says HMRC should provide services that are designed around your needs, and “are accessible, easy and quick to use, minimising the cost to you.” MTD seems to sidestep that by letting you pay extra to do exactly what you could do for free.

Real‑World Numbers

Smartphone apps and free tools cost less than £10 per year.
Software packages risk up to 4 % of your business turnover when added.
For small sole traders, those extra pounds might mean the difference between a decent living and a penny‑wise ledger.

On The Horizon

Since April 2026, those making >£50k will have to file quarterly. In 2027, it drops to >£30k, and by 2028 >£20k. That’s a moving target that feels like a game of accounting hopscotch, where you never quite know when you’ll have to jump.