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Research carried out by the Association of Independent Professionals and the Self-Employed (IPSE) has found that the majority of sole traders don't currently have an understanding of Making Tax Digital for Income Tax (MTD for IT), despite it set to take effect from April 2026.
Most sole traders are not ready for MTD changes
The majority of sole traders do not have a clear understanding of MTD for IT, according to research from IPSE.
A survey conducted by IPSE found that 70% either have not heard of the initiative or do not realise it requires digital record-keeping and quarterly submissions through approved software. MTD for IT will come into force in April 2026.
However, IPSE's survey found that most sole traders are still managing their finances in ways that will not meet MTD requirements. A third continue to use pen and paper for their books, two-thirds rely on spreadsheets and more than half track income through bank statements.
The timeline for MTD is:
- From April 2026: sole traders and landlords earning over £50,000 must keep digital records and submit quarterly updates through compatible software.
- From April 2027: sole traders and landlords earning over £30,000.
- From April 2028: sole traders and landlords earning over £20,000.
IPSE said: 'Given the fact that we've already had previous delays and considerable resources and time have been invested, HMRC will not be pausing this rollout anytime soon.
'However, HMRC has a duty to inform as many sole traders as possible – and right now, that awareness campaign is simply not landing.
'With less than six months until the first deadline, our findings highlight a serious communication gap. Most respondents reported receiving no direct information from HMRC about MTD, which explains why awareness remains so low.'
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Spending cuts and tax rises to serve as headwinds to economy
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MTD penalties waived for first year of Income Tax
Self assessment taxpayers due to join Making Tax Digital for Income Tax (MTD for IT) next April will not face penalties if they are late filing quarterly updates.
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ESSENTIAL TAX DATES FOR JANUARY
1 January
Due date for payment of corporation tax for period ended 31 March 2025.
14 January
Due date for income tax for the CT61 quarter to 31 December 2025.
19 January
PAYE, Student loan and CIS deductions are due for the month to 5 January 2026.
PAYE quarterly payments are due for small employers for the pay periods 6 October 2025 to 5 January 2026.
31 January
Deadline for submitting your 2024/25 self assessment return (£100 automatic penalty if your return is late) and the balance of your 2024/25 liability together with the first payment on account for 2025/26 are also due.
Capital gains tax payment for 2024/25.
Balancing payment - 2024/25 income tax and Class 4 NICs.
QUOTE OF THE MONTH
'And with our snap poll showing that four in five business leaders view the Budget negatively, it is no surprise that confidence remains close to record lows afterwards.'
Anna Leach, Chief Economist at the Institute of Directors (IoD), commenting on a report by the business group that showed that confidence amongst directors is near a record low.
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