More than 200,000 landlords and sole traders who currently manage their own tax affairs could face higher costs as the government’s Making Tax Digital (MTD) initiative begins its phased introduction from April. A survey of accountancy professionals suggests that a surge in demand may push fees up by between 5% and 10% for some businesses.
From 6 April, more than 860,000 sole traders and landlords earning over £50,000 from self-employment or property will be required to use digital income tax reporting. With less than two months to prepare, businesses are being urged to act promptly as parts of the accountancy sector report capacity strains.
Capacity Pressures May Drive up Fees for Unrepresented Businesses
According to HMRC figures, around 212,500 of those affected currently operate without an accountant to file their self-assessment tax return. Analysis by tax software company TaxCalc indicates that these “unrepresented” businesses could face sharply higher costs if they seek professional support at short notice.
TaxCalc’s latest survey of 215 accountancy professionals found that nearly half, 47%, plan to increase prices for MTD clients. The company suggests that a last-minute rush ahead of April could result in businesses paying 5% to 10% more in fees, largely driven by increased demand rather than the regulatory change itself.
For a typical small business paying about £1,500 per year in accountancy fees, a 10% rise would amount to an additional £150 annually. For businesses that have not previously paid for accountancy services, the shift could be more significant. As Andy North, chief customer officer at TaxCalc, explained, firms may pass on the additional time, capacity and onboarding costs associated with preparing clients for MTD compliance.
The survey also highlights wider strain within the profession. According to TaxCalc, 48% of accountancy professionals report having more clients than they can manage, while 36% cite “too much work” as their primary cause of stress. North warned that businesses delaying preparation may struggle to find an accountant willing or available to take them on, increasing the likelihood of higher fees.
Penalties Paused Initially but Wider Rollout Expected to Increase Demand
Although the MTD regime begins in April, penalties for failing to meet its requirements will be paused during the first year. From April 2027 onwards, missed quarterly submission deadlines will result in businesses accruing penalty points. Once the threshold is reached, a £200 fine is issued, with a further £200 charge for each subsequent missed deadline until sustained compliance is achieved.
The initiative is being introduced in stages. The current £50,000 income threshold will fall to £30,000 in April 2027, bringing more landlords and sole traders into scope. According to North, this expansion is likely to trigger a larger wave of demand for accountancy services throughout 2026 and into 2027.
TaxCalc advises businesses to treat April as the starting point rather than the deadline. While the first submission is not due until the end of June, maintaining digital records from the outset may reduce pressure later. North also cautioned against filing inaccurate quarterly figures merely to meet deadlines, noting that discrepancies between quarterly updates and final tax returns may prompt further scrutiny from HMRC.
Some businesses may choose to continue filing independently, though MTD-compatible software will be required to submit data digitally. With the first phase imminent and further expansion planned, the coming months are likely to test both small businesses and the accountancy firms supporting them.
