More than half of UK SMBs admit they're not ready for new digital tax deadline

MTD affects UK SMBs and sole traders who earned more than £50,000 in revenue

55%, or 475,000, are still unprepared for the upcoming August 7 submission

Lloyds warns many business owners still see it as a major source of confusion

More than half (55%) of Britain's small businesses that are affected by the new Making Tax Digital (MTD) for Income Tax rules are not yet fully prepared for the first submission deadline on August 7 2026, new research has claimed.

Using HMRC estimates, Lloyds Bank warns this could represent nearly half a million (475,000) sole traders, landlords and small businesses.

The first cohort of taxpayers required to follow HMRC's new MTD rules will be those with an annual revenue of at least £50,000, with subsequent years affected workers with a £30,000 revenue and then £20,000.

UK's SMBs aren't ready for MTD next month

Making Tax Digital's requirements for multiple annual submissions came info effect this tax year, beginning April 6, 2026, however taxpayers affected by the changes haven't needed to submit anything yet. But with the first deadline of August 7 quickly approaching, this Lloyds data paints a worrying picture.

While initial setup can be daunting for many taxpayers, those who have already adopted MTD's principles report significant benefits. Two in five (40%) said digital tax management made them more organized, and nearly one in three (28%) agreed it reduced las-minute tax administration stress.

Taxpayers also worry that HMRC's communications have been unclear so far – while the advantages of digital record-keeping are broadly recognized, many are unsure what actions they must take before the first deadline.

"Making Tax Digital represents one of the biggest administrative changes many sole traders will have experienced for years," Head of Business Banking Ramki Sankaranarayan wrote.

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Eligible Lloys Business Account customers can access the company's MTD functionality for free, with the banking giant becoming the latest in a growing number trying to solve some bookkeeping tasks internally. For many, dedicated accounting software still offers greater functionality around other financial records-keeping, but the growing availability of hassle-free, built-in tools promises to reduce the likelihood of receiving any penalties as MTD becomes more widespread.

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With several years’ experience freelancing in tech and automotive circles, Craig’s specific interests lie in technology that is designed to better our lives, including AI and ML, productivity aids, and smart fitness. He is also passionate about cars and the decarbonisation of personal transportation. As an avid bargain-hunter, you can be sure that any deal Craig finds is top value!