Only 1 in 4 signed up: What’s going wrong with UK’s new tax system?

• Just 218,000 out of 864,000 have registered so far.
• April 6 deadline has passed, but most are yet to act.
• Millions more will be pulled into the system by 2028.

The UK’s new digital tax system has gone live, but the response from those expected to use it has been far slower than anticipated.

Under the Making Tax Digital for Income Tax scheme, sole traders and landlords earning over £50,000 in the 2024/25 tax year were required to sign up by April 6. The system asks users to keep digital records and submit quarterly updates on income and expenses through approved software to HM Revenue and Customs.

But early figures show a clear gap. Only 218,000 people have registered out of an expected 864,000. That means roughly three quarters have not signed up, even after the deadline has passed.

The numbers point to more than just delay. They suggest a mix of low awareness, hesitation, and confusion around what the system actually requires—particularly among those who do not have accountants or structured financial support. As one policy expert from the Association of Independent Professionals and the Self-Employed noted, the low sign-up rate is “concerning but not surprising”, as quoted in a news report, highlighting a significant awareness gap.

A deadline passed, but urgency still missing

Despite the April 6 requirement, there is little immediate pressure on those who have not yet signed up. HMRC has confirmed that penalties will not be applied at this stage.

Instead, the first real compliance point comes later, when users are expected to submit their first quarterly update by August 7. This gap between sign-up and enforcement appears to be shaping behaviour. Many taxpayers seem to be taking a wait-and-watch approach, assuming there is still time before the system becomes unavoidable.

There is also a practical layer to the delay. The shift from annual self-assessment to quarterly digital reporting is a significant change in how smaller earners manage their finances. For many sole traders and landlords, who often rely on spreadsheets, paper records or end-of-year accounting, moving to software-led reporting feels like an added burden rather than a simple upgrade.

Accountants are expected to play a key role in this transition, but they also face capacity limits, managing multiple clients adjusting to the same system at once. This has likely slowed down registrations further.

A much bigger rollout is already on the way

What makes the slow start more significant is the scale of what lies ahead. The current phase only applies to those earning over £50,000. But the government plans to expand the system steadily over the next two years.

From April 2027, anyone earning over £30,000 from self-employment or property income will be required to comply. From April 2028, the threshold drops again to £20,000.

This effectively transforms the system from a targeted reform into a widespread shift in how tax is reported in the UK. Millions more people—freelancers, side hustlers and small landlords—will eventually be brought into the same structure.

HMRC has said it expects registrations to rise as the first quarterly deadline approaches, adding that the rollout is following a pattern similar to its earlier digital VAT programme. The department has already used letters, advertising and social media campaigns to spread awareness, though it has not disclosed how much has been spent on outreach.

For now, the early data suggests the system is still settling in. The policy is in place, the deadlines are set, but for a large share of those affected, the shift has not yet fully registered.

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