As Making Tax Digital for Income Tax edges ever closer for many sole traders and landlords.
However, according to new research sections of those affected by the new digital reporting requirements for income tax remain unclear, unconvinced or unprepared for this landmark change.
Despite repeated communications from HMRC, awareness among sole traders remains worryingly low.
According to a new study by Wolters Kluwer Tax & Accounting, almost half of the taxpayers affected say they know very little about MTD.
More concerning still, one in five sole traders who know MTD will affect them admit they have taken no steps at all to prepare yet.
Awareness does not mean readiness for Making Tax Digital for Income Tax
Landlords are often viewed as the more prepared group and in many cases that is true. Around two thirds say they are familiar with MTD requirements and many have clearly read the letters confirming they fall within wave one based on 2024 to 2025 earnings.
However, higher awareness has not removed concern. Even among these relatively well-prepared landlords, almost half worry about choosing the right software, while 44 per cent are concerned about the cost of compliance.
The picture is even more challenging for sole traders. One in three fear that MTD will be time consuming, while many still don’t fully understand the rules.
Nevertheless, 30 per cent are concerned about penalties or fines, which suggests anxiety rather than confidence is driving engagement.
When asked what would help most, sole traders placed greatest value on hands-on support from an accountant or adviser, alongside access to affordable, easy to use software.
Scepticism remains a major hurdle for MTD
Low awareness is compounded by scepticism. More than a quarter of sole traders say they see no benefit from MTD, believing it will primarily help HMRC while increasing their own costs and administrative burden.
In contrast, landlords are more likely to see potential upsides, particularly improved financial forecasting and better access to data.
Nearly half of landlords identify this as a benefit, compared with just 14 per cent of sole traders.
The next few months will be critical for sole traders and landlords
The survey, conducted between in January among landlords and sole traders with turnover exceeding £50,000 makes one thing clear. Time is no longer on anyone’s side.
If you aren’t prepared yet, our team are here and ready to assist you get ready for MTD, please get in touch.