More than 200,000 landlords and sole traders ‘face up to 10%’ cost hike as Making Tax Digital looms

A stressed man calculating how much Making Tax Digital will cost him — More than 200,000 landlords and sole traders ‘face up to 10%’ cost hike as Making Tax Digital looms

(Image credit: Getty Images)

Businesses could face paying between 5% and 10% more for an accountant as a result of a surge in demand due to the government’s Making Tax Digital (MTD) rules, which will begin being rolled out from this April, according to a survey.

More than 860,000 sole traders and landlords – those earning more than £50,000 from self-employment and property – need to start using digital income tax reporting from 6 April and are being urged to act now with less than two months left to prepare.

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These ‘unrepresented’ businesses risk being hit with sharply higher costs as Making Tax Digital rolls out, analysis by tax software company TaxCalc suggested.

A capacity crunch could leave businesses that are seeking to hire an accountant at the last-minute paying 5%-10% higher fees in the lead up to April, according to the findings of TaxCalc’s latest survey of 215 accountancy professionals.

How much could Making Tax Digital cost me?

Nearly half (47%) of accountants say they plan to increase prices for MTD clients, according to the TaxCalc survey.

For a typical small business currently paying around £1,500 per year in accountancy fees, a relatively modest 10% increase would add around £150 annually.

“However, for unrepresented businesses that currently pay nothing for accountancy support, engaging an accountant late to meet MTD deadlines could mean jumping from £0 to a much higher-priced service based on our survey findings,” said Andy North, chief customer officer at TaxCalc, “as firms pass on the extra time, capacity and onboarding costs associated with last-minute MTD preparation”.

“Scaled across the UK’s 212,500 unrepresented businesses, this could equate to tens of millions in additional accountancy costs annually.”

Some parts of the accountancy sector are already reporting being stretched. The TaxCalc survey found almost half (48%) of accountancy professionals say they have more clients than they can manage, while ‘too much work’ is cited as the number one cause of stress by 36% of firms.

“Businesses that leave MTD preparation until the last minute may struggle to find an accountant willing or available to take them on and, as a result, are far more likely to face higher fees, particularly when firms are asked to onboard them at short notice,” said North.

What are the penalties for Making Tax Digital?

Penalties for failing to meet the requirements of Making Tax Digital are paused during the first year, but any missed quarterly submission deadlines from April 2027 onwards will result in businesses accruing penalty points.

Once the penalty threshold is reached, a £200 fine is issued, with a further £200 charge for each subsequent missed deadline until sustained compliance is achieved.

More demand for accountants from April 2027

Making Tax Digital is being rolled out in stages. Looking ahead, when the Making Tax Digital business income threshold falls from £50,000 to £30,000 in April 2027, the current proportion of unrepresented businesses (25%) is likely to rise, as more landlords, smaller businesses and sole traders enter the mix.

North said: “This is expected to trigger a much larger wave of last-minute demand for accountancy services throughout 2026 and into 2027, placing sustained pressure on firms and driving costs even higher for businesses that delay engagement.”

Top tips for businesses ahead of Making Tax Digital

1. Treat April as the start – not the deadline

While Making Tax Digital officially begins in April, the first deadline for submissions isn’t until the end of June. But it makes sense for businesses to start keeping digital records from day one. Doing so helps avoid a last-minute rush, reduces stress, and makes that first quarter far easier to manage.

And although HMRC fines won’t be issued until April 2027, disorganised records in the lead-up significantly increase the risk of avoidable penalties.

2. Build habits, not spreadsheets

“MTD is really about behaviour change – updating records little and often, weekly or monthly, is far easier than trying to catch up once a quarter,” said North. “Businesses that build good habits early will find MTD far less disruptive.”

3. Penalties and fines will add up faster than businesses realise

While fines shouldn’t be issued until April 2027, building the habit of meeting all quarterly deadlines now is crucial. Missing four updates would take you straight to a fine once penalties are switched on.

4. Don’t assume quarterly figures can be ‘fudged’

While there’s no requirement for quarterly figures to be perfectly accurate, they are expected to be a reasonable reflection of what’s happening in the business.

“Deliberately filing zeros or clearly wrong numbers just to meet a deadline goes against the spirit of Making Tax Digital, which is designed to encourage regular, up-to-date record-keeping,” said North.

Quarterly updates are later compared with the final tax return, so obvious discrepancies can raise questions and lead to additional scrutiny. It effectively raises a flag to HMRC that you're probably not maintaining digital records, and could well trigger an investigation.

In practice, filing something broadly accurate will be far safer than submitting figures that don’t reflect reality.

5. Expect your accountancy firm pricing to change

Quarterly reporting means more work, whether you manage it yourself or use an accountant. Businesses should expect accountancy fees to change and budget accordingly, rather than being surprised later in the year.

6. Remember this is only the first wave

North said: “The current £50,000 income threshold is relatively high. From next year, Making Tax Digital will extend to businesses earning £30,000 or more, likely including more landlords with one property, or sole traders. Even if you’re not affected now, it’s worth preparing early.”

7. You can still file yourself – with compliant software

Some businesses entering Making Tax Digital have never used an accountant and may want to continue filing themselves. That’s fine – but you will still need MTD-compatible software to submit your data digitally.

Laura Miller is an experienced financial and business journalist. Formerly on staff at the Daily Telegraph, her freelance work now appears in the money pages of all the national newspapers. She endeavours to make money issues easy to understand for everyone, and to do justice to the people who regularly trust her to tell their stories. She lives by the sea in Aberystwyth. You can find her tweeting @thatlaurawrites