Too many sole traders ‘know very little’ about MTD

Low awareness is coupled with scepticism as one in four self employed and sole traders do not see any benefit from Making Tax Digital (MTD) for Income Tax, saying it will only help HMRC and raise their costs, latest survey finds

Six weeks before the start of MTD quarterly reporting for £50,000 qualifying income taxpayers, awareness levels across certain segments remain worryingly low with a staggering 46% of sole traders saying they ‘know very little’ about MTD, raising questions about the effectiveness of HMRC promotions and communications.

Scepticism about the advantages of MTD quarterly reporting is rife among sole traders with 26% saying they ‘see no benefits from MTD’. But accountants could benefit from the rollout with 77% of respondents saying they would be ‘likely to seek help from advisors’.

Landlords are more likely than sole traders to see the benefits, citing better financial forecasting and data analysis, with nearly half (44%) of landlords saying this will be a plus, but only 14% of sole traders thought the same, found a survey of £50,000 wave one taxpayers by Wolters Kluwer Tax & Accounting.

Awareness among landlords is high and they have clearly read their letters from HMRC, two of which have now been sent out advising all the 860,000 plus wave one taxpayers they are inside MTD due to 2024-25 earnings.

Around two-thirds of landlords (66%) say they are familiar with MTD requirements, compared with 46% of sole traders who ‘know very little about what it involves’. However, familiarity does not mean these landlords have their digital software in place ready for the first quarterly filing date on 7 August.

Total inaction was also identified in the survey with one in five sole traders (20%) who were aware MTD would affect them, saying they had taken no steps to prepare, exacerbated by the low levels of awareness.

Even the relatively ‘well prepared’ landlords are concerned about choosing the right software (48%) and the cost of compliance (44%), showing awareness does not equate to readiness.

‘Making Tax Digital represents a fundamental shift in how individuals manage and report their tax affairs, and while landlords are largely on track, many sole traders still feel uncertainty,’ warned Bas Kniphorst, EVP and managing director of Wolters Kluwer Tax & Accounting Europe. ‘With April fast approaching, the priority now must be turning awareness into action, supported by clear guidance, the right technology and trusted professional advice.’

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