Over 200K Landlords and Sole Traders Face 10% Accountant Cost Surge with MTD

Companies might encounter accountant fees rising by 5% to 10% owing to a sharp increase in demand triggered by the government’s Making Tax Digital (MTD) regulations, set to launch progressively starting this April, as indicated by a recent survey.

Over 860,000 sole traders and landlords—specifically those generating more than £50,000 annually from self-employment or property income—must commence digital income tax reporting from April 6. With fewer than two months remaining for preparations, they are strongly encouraged to take immediate action.

These businesses, often operating without professional accounting representation, could suffer significant cost escalations as MTD implementation advances, according to insights from tax software provider TaxCalc.

A potential shortage of accounting capacity may force last-minute clients to pay 5% to 10% premium fees right before the April deadline, based on TaxCalc’s survey involving 215 accounting experts.

How much might Making Tax Digital add to my expenses?

The TaxCalc survey reveals that nearly half (47%) of accountants intend to raise their rates for MTD-affected clients.

For an average small enterprise shelling out about £1,500 yearly on accounting services, even a 10% hike would translate to an extra £150 each year.

“Yet, for those unrepresented businesses that presently incur zero accounting expenses, rushing to hire an accountant near MTD deadlines could mean leaping from nothing to substantially elevated service costs, reflecting the additional time, capacity strains, and onboarding expenses tied to urgent preparations,” explained Andy North, TaxCalc’s chief customer officer. “When extrapolated across the UK’s 212,500 such unrepresented entities, this scenario could generate tens of millions in extra annual accounting expenditures.”

Certain segments of the accounting industry are already feeling the strain. The survey by TaxCalc indicates that almost half (48%) of accounting professionals report having more clients than they can effectively handle, with excessive workload identified as the primary stressor by 36% of practices.

“Enterprises delaying MTD readiness until the eleventh hour could find it challenging to secure an accountant with availability or willingness to onboard them, thereby facing steeper fees—especially under the pressure of short-notice engagements,” North added.

What penalties apply under Making Tax Digital?

During the initial year of Making Tax Digital, penalties for non-compliance are suspended. However, starting from April 2027, any overlooked quarterly submission deadlines will accumulate penalty points for businesses.

Upon reaching the penalty threshold, a £200 fine is imposed, followed by another £200 for each additional missed deadline until consistent compliance is demonstrated.

Increased accountant demand expected from April 2027

Making Tax Digital is being introduced in phases. Anticipating the future, when the business income threshold drops from £50,000 to £30,000 in April 2027, the share of unrepresented businesses—currently at 25%—is projected to grow, incorporating more landlords, compact enterprises, and sole proprietors.

North commented: “This development is poised to unleash a far greater surge of urgent demand for accounting services through 2026 and into 2027, exerting ongoing pressure on practices and potentially elevating costs further for those who postpone professional engagement.”

Essential advice for businesses preparing for Making Tax Digital

1. View April as the beginning, not the end point

Although Making Tax Digital kicks off in April, the initial submission deadline arrives at the end of June. Nonetheless, businesses should initiate digital record-keeping right from the outset. This approach prevents a frantic scramble, alleviates anxiety, and simplifies handling the debut quarter.

Even though HMRC penalties remain inactive until April 2027, sloppy record management beforehand heightens vulnerability to preventable fines down the line.

2. Cultivate consistent habits over one-off spreadsheets

“At its core, MTD demands a shift in behavior—maintaining records incrementally and frequently, whether weekly or monthly, proves much simpler than reconciling everything quarterly,” North advised. “Those who instill solid habits from the start will experience minimal disruption from MTD.”

3. Penalties and fines accumulate more swiftly than expected

Fines may not activate until April 2027, but establishing the routine of hitting every quarterly deadline immediately is vital. Overlooking four submissions would propel you directly into fined territory once enforcement begins.

4. Avoid presuming quarterly data can be manipulated

Quarterly figures need not be impeccably precise, but they must reasonably mirror the business’s actual performance.

“Intentionally submitting zeros or blatantly inaccurate data merely to tick a deadline box contradicts MTD’s purpose, which promotes routine and current record maintenance,” North emphasized.

These quarterly reports are reconciled against the annual tax return later, so glaring inconsistencies may prompt inquiries and heightened examination. It signals to HMRC a likely lapse in digital record-keeping, possibly sparking an audit.

In reality, providing generally accurate submissions offers greater security than entering unrealistic numbers.

5. Anticipate adjustments in your accountant’s pricing structure

The shift to quarterly reporting amplifies workload, regardless of self-management or professional assistance. Enterprises ought to foresee changes in accounting fees and plan budgets proactively to sidestep surprises later.

6. Recognize this as merely the initial phase

North noted: “The £50,000 income cutoff is fairly elevated at present. Starting next year, MTD expands to cover businesses with £30,000 or higher earnings, encompassing additional landlords with single properties or sole traders. Even if unaffected currently, early preparation remains prudent.”

7. Self-filing remains viable using compliant tools

Certain businesses new to MTD who have always handled filings independently might prefer to persist. This is permissible, provided MTD-approved software is employed for digital submissions.