With the imminence of Making Tax Digital, over 200,000 landlords and sole proprietors may see cost increases of up to 10%

Experts have cautioned that the government's upcoming Making Tax Digital initiative could result in "tens of millions" in additional accounting costs for about 212,500 UK businesses

As a result of the government's Making Tax Digital (MTD) regulations, which will start to be implemented in April, businesses may have to pay an additional 5 to 10 percent for an accountant, according to a survey.

With less than two months to prepare, over 860,000 landlords and sole proprietors who make more than £50,000 from their properties and self-employment must begin using digital income tax reporting on April 6.

Based on data from HMRC, approximately 212,500 UK businesses do not currently have an accountant to file their self-assessment tax return.

According to an analysis by the tax software company TaxCalc, these unrepresented businesses run the risk of experiencing significantly higher expenses as Making Tax Digital takes effect.

According to the results of TaxCalcs' most recent survey of 215 accounting professionals, a capacity shortage may force companies looking to hire an accountant at the last minute to pay 5%10% higher fees in the run-up to April.

According to estimates, these unrepresented companies could face tens of millions more in yearly accounting fees if they engage late. This is due to a rush of demand in the accounting industry rather than the Making Tax Digital regulations.

When multiplied by the 212,500 unrepresented businesses in the UK, this could result in yearly accounting expenses of tens of millions.

What would it cost me to make tax digital?

According to the TaxCalc survey, an overwhelming majority of accountants (47 percent) say they intend to raise prices for MTD clients.

A comparatively small 10 percent increase would add about 150 annually to the average small business's current accounting fees of about 1,500.

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

"With 212,500 unrepresented businesses in the UK, this could add up to tens of millions of dollars in extra accounting expenses every year. The "

Already, some segments of the accounting industry are complaining about being overworked. According to the TaxCalc survey, nearly half (48%) of accountants claim to have more clients than they can handle, and 36% of firms cite an excessive amount of work as the main source of stress.

"Companies that put off MTD preparation until the last minute may find it difficult to find an accountant who is readily available or willing to take them on and, as a result, are far more likely to face higher fees, especially when firms are asked to onboard them at short notice," North stated.

What consequences come with implementing digital taxation?

Businesses that miss quarterly submission deadlines starting in April 2027 will be assessed penalty points; however, penalties for noncompliance with Making Tax Digital requirements are suspended for the first year.

A 200 fine is imposed once the penalty threshold is reached, and an additional 200 fee is assessed for each missed deadline until consistent compliance is attained.

Increased need for accountants starting in April 2027.

The implementation of Making Tax Digital is happening gradually. The current percentage of unrepresented businesses (25 percent) is expected to increase as more landlords, small businesses, and sole traders join the mix when the Making Tax Digital business income threshold drops from 50,000 to 30,000 in April 2027.

"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," North stated. The "

The best advice for companies before their taxes go digital.

1. . Think of April as the beginning rather than the end.

Although the first deadline for submissions is not until the end of June, Making Tax Digital officially starts in April. However, companies should begin storing digital records right away. By doing this, you can prevent a last-minute rush, lower your stress level, and handle the first quarter much more easily.

Furthermore, even though HMRC fines won't be imposed until April 2027, the likelihood of avoidable penalties is greatly increased by disorganized records in the lead-up.

Two. Create habits instead of spreadsheets.

"MTD is really about behavior change," North stated. "It's much easier to update records small and frequently, like weekly or monthly, than to try to catch up once a quarter." "MTD will be much less disruptive for businesses that establish positive habits early. A "

Three. Fines and penalties will mount up more quickly than companies anticipate.

Establishing the practice of meeting all quarterly deadlines now is essential, even though fines shouldn't be imposed until April 2027. Once penalties are activated, missing four updates will result in a fine.

Forty. Don't assume that quarterly numbers can be falsified by anyone.

Although it is not necessary for quarterly figures to be flawless, they should be a fair representation of the company's operations.

"It goes against the spirit of Making Tax Digital, which is intended to encourage regular, up-to-date record-keeping, to purposefully file zeros or obviously incorrect numbers just to meet a deadline," North stated.

Since the final tax return is compared with quarterly updates, any clear differences may cause suspicions and further investigation. It essentially alerts HMRC to the likelihood that you are not keeping digital records, which may lead to an investigation.

In reality, it will be much safer to file something that is generally accurate than to submit numbers that don't represent reality.

Five. You should anticipate a change in the cost of your accounting firm.

Regardless of whether you use an accountant or handle it yourself, quarterly reporting entails more work. Instead of being caught off guard later in the year, businesses should anticipate changes in accounting fees and adjust their budgets accordingly.

Six. Do not forget that this is just the initial wave.

"The current income threshold of £50,000 is comparatively high," stated North. Businesses making £30,000 or more will be covered by Making Tax Digital starting in the following year, which probably includes more sole proprietors and landlords with a single property. It's worth getting ready early, even if you're not currently impacted. The "

Seven. With compliant software, you can still file on your own.

Some companies that are submitting their taxes online have never worked with an accountant and might prefer to keep doing it themselves. That's okay, but in order to submit your data digitally, you will still require software that is compatible with MTD.