Contents
- Why the two figures differ
- Where taxpayers dropped out before filing
- Clients without cloud software
- The cost of clients without digital records
- Quarterly VAT filing history and Q1 success
- Changes to make before 7 November
- Questions
General information for practice owners, current at the time of writing (October 2026). Figures are as reported by Bright and Accountancy Age from the Accountex Manchester 2026 session "The Reality of MTD for Income Tax After Quarter One"; rules and deadlines change — take your own advice before relying on them.
Six months after Making Tax Digital for Income Tax went live for sole traders and landlords earning over £50,000, two very different pictures of how it went are circulating. HMRC's own figures say 87% of taxpayers filed their first quarterly update on time. A survey of over 14,000 UK practitioners, presented by Bright's Paul Onions at Accountex Manchester on 28 September 2026, says the real completion rate was 54%. The second figure includes the clients who never reached the filing stage, and the gap between the two shows where the risk sits before Q2 closes on 7 November.
Both figures are accurate, and they measure different groups. HMRC's 87% is the on-time rate among taxpayers who had reached the point of having an active quarterly obligation live in its system — roughly 530,000 people. It says nothing about everyone who was mandated into MTD ITSA but never got that far: the ones who hadn't registered at all, or had registered but never had an obligation configured. Bright's survey instead measured against the full mandated population — everyone HMRC says should have filed a Q1 update, regardless of how far they had got with registration and setup. Against that denominator, the completion rate falls to 54%.
For planning, HMRC's number is of limited use to a practice, because it covers only the clients who were furthest through setup. The 54% covers the whole Q1 workload, including the clients who never made it onto the system in time for work to start.
Where taxpayers dropped out before filing
Bright's data breaks the mandated population down stage by stage, and most of the drop-off happens before anyone reaches a quarterly return.
| Stage | Taxpayers | % of mandated population |
|---|
| Total mandated into MTD ITSA from April 2026 | 864,000 | 100% |
| Registered for MTD ITSA | 583,000 | 67% |
| Had a Q1 obligation set up in HMRC's system | 530,000 | 61% |
| Successfully filed the Q1 update | 463,000 | 54% |
The biggest single drop is at registration: a third of the mandated population never completed it. Registration has to be dealt with months before a quarter ends, client by client, and some of those clients do not yet know that MTD ITSA applies to them.
Clients without cloud software
The second cause is record-keeping. Across the clients who did reach Q1, 70% were not using native cloud bookkeeping software. Of those: 37% were still working from paper records or manual receipts, and 33% were keeping records on spreadsheets. Of all Q1 filings submitted, 24% went through bridging software, which links a spreadsheet to HMRC's system. Those records were not kept digitally from the point of each transaction.
Bridging software is a permitted route under MTD ITSA's rules. It is slower, and the difference shows up directly in the time your team spends on each return.
The cost of clients without digital records
Bright's time-tracking data gives a concrete figure to work with: practices processing returns for clients on paper, spreadsheets or bridging software spent an average of 35 extra minutes per return — a 46% increase in non-billable time — against a sub-30-minute baseline for clients already on compatible cloud software.
Worked example — illustrative only
Take a practice with 50 clients mandated into MTD ITSA from April 2026. In line with Bright's 70% figure, say 35 of them came into Q1 without native cloud software.
35 clients × 35 extra minutes = 1,225 minutes, or roughly 20 hours of unbudgeted non-billable time in a single quarter. Repeated across four quarters, that's around 80 hours a year — nearly two full working weeks — spent re-keying and reconciling records that should have come in digital in the first place. At an illustrative charge-out rate of £50 an hour, that's roughly £4,000 a year of margin absorbed by one group of clients, usually at the same fee the well-prepared clients are paying.
Before 7 November, decide whether that group needs a software migration, a bridging-software fee uplift, or both.
Quarterly VAT filing history and Q1 success
The strongest signal in Bright's data is filing history. Over 95% of taxpayers who successfully filed their Q1 MTD ITSA update were already filing quarterly VAT returns before MTD ITSA existed. They already had a quarterly habit, a bookkeeping rhythm, and in most cases the right software, so MTD ITSA was a smaller step than it was for everyone else.
That gives you a usable filter today. If you're triaging which clients are at risk of missing 7 November, start with the ones who have no quarterly VAT history — sole traders and landlords who have only ever filed annually. They are, on this data, the group furthest from the pattern that predicts success, and they will need direct contact from you.
Changes to make before 7 November
- Chase the unregistered first. The biggest single drop in the funnel happens before anyone files anything — confirm that every mandated client has completed MTD ITSA registration.
- Flag no-quarterly-history clients by name. Build a short list of clients with no prior quarterly VAT filing and treat them as higher-risk for Q2.
- Re-price the 35-minutes-extra group deliberately. If a client's record-keeping is adding 46% to your non-billable time every quarter, raise it with the client as a pricing question. See our guide to pricing and packaging advisory services.
- Record processing time for each client. Processing-time figures for each group of clients give you the evidence for that pricing conversation. Our guide on KPIs every accountancy firm should track covers how to capture it.
- Plan for the lower threshold. The £50,000 qualifying-income threshold drops to £30,000 from 6 April 2027. Whatever Q1 cost you in capacity, a larger and generally less well-resourced client group hits the same funnel next spring.
We covered the lead-up to MTD ITSA's launch in what April 2026 meant for your practice, and the parallel capacity hit from HMRC's own auto-enrolment drive in HMRC's auto sign-up for MTD. Read alongside the Q1 figures, both pieces point to practice capacity as the main risk, and Q1 has now put a number on it.
