One in seven (14%) UK sole traders admit they “don’t understand anything at all” about HMRC’s new Making Tax Digital (MTD) for Income Tax rules – despite it being the biggest shake up to the self-assessment system in three decades.
Research by leading accountancy software FreeAgent – which has so far recorded the highest number of MTD final submissions across the major UK providers, according to HMRC data – also revealed that just 12% of those surveyed are confident they fully understand what it means, and the legislative changes it could bring for them and their business. In an industry rife with freelancers and sole traders, that’s a lot of lack of understanding.
An estimated 864,000 sole traders and landlords earning over £50,000 will be impacted by Making Tax Digital for Income Tax this year – with the deadline for signing up to the legislation passing on Tuesday 6th April. However, data from HMRC shows that only 336,000 people have currently registered.
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Now, experts are urging those who have yet to sign up to act sooner rather than later, warning that putting it off could leave taxpayers scrambling to understand the new rules, potentially leading to costly penalties further down the line.
Jon Martingale, head of product management and MTD Expert at FreeAgent, said: “It’s incredibly surprising just how many sole traders and landlords don’t understand what MTD means for them or their businesses.
“We’re hearing from dozens of worried people on a near daily basis who are still confused about what MTD actually means, why they need to do it and why it matters, but in reality getting set up is much simpler than many people think.
“For those who still aren’t sure, this is a mandatory government initiative for sole traders and landlords making over £50,000 – and it’s coming into force for those earning over £30,000 next year, and £20,000 from 2028. There’s no escaping it.
“Penalties will also begin to be introduced for people who aren’t compliant from next year, so it’s really important for those affected to start getting organised now rather than waiting until the last minute and getting caught out.”
With less than three months to go until the first mandatory quarterly submission deadline on 7 August 2026, tax experts are calling on those yet to sign up to get ahead of the curve and prepare now.
Jon continued: “If you’re one of those people who are impacted by MTD for Income Tax, you really need to get organised now before the August deadline creeps up.
“HMRC isn’t going to automatically enrol you, plus leaving it until the last minute could turn what should be a straightforward process into a major headache.
“Getting yourself set up now gives you enough time to choose the right MTD-compatible software, get your records organised and, crucially, avoid a last-minute panic before submissions are due.
“The sooner people get into the habit of keeping digital records and updating things regularly, the easier these quarterly deadlines will be to manage moving things forward.”
Learn more about MTD and how to sign up here.
