New research from IRIS Software Group reveals that 45% of UK sole traders, representing around 1.4 million businesses, feel unprepared for the upcoming Making Tax Digital (MTD) for Income Tax changes, set to begin in April 2026. The study, which surveyed 1,000 sole traders, also found that nearly a third (31%) have never heard of MTD.
Under the new rules, sole traders earning over £50,000 will be required to keep digital records and file quarterly updates using compatible software. Thresholds will drop to £30,000 in 2027 and £20,000 in 2028. Noncompliance could lead to penalties similar to those for VAT errors, including fines and interest charges.
Awareness remains a major issue. 76% wish they knew more about the requirements, while 74% want more support from HMRC. Only 23% feel “very prepared.”
Generational differences were clear. 37% of 25 to 34 year olds felt ready, compared to just 10% of those aged 45 to 54. Younger traders are also more likely to use digital tools and expect MTD to help with budgeting and avoiding tax surprises.
Mark Chambers, Managing Director at IRIS Accountancy, said the changes present an opportunity for sole traders to modernise and gain better financial visibility if they act now.
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