Most Sole Traders Are Not Ready for MTD Changes This April

The Awareness Gap: 70% of Self-Employed Left in the Dark

The majority of sole traders do not have a clear understanding of Making Tax Digital (MTD) for Income Tax, according to research from IPSE, the self-employed association.

A survey conducted by IPSE found that 70% of respondents either have not heard of the initiative or do not realise it requires digital record-keeping and quarterly submissions through approved software.

The Countdown: MTD Deadlines Starting April 2026

With the first phase of MTD for Income Tax coming into force in April 2026, the window for preparation is closing rapidly. The rollout follows this timeline:

• From April 2026: Sole traders and landlords earning over £50,000.
• From April 2027: Sole traders and landlords earning over £30,000.
• From April 2028: Sole traders and landlords earning over £20,000.

Manual Bookkeeping: A Compliance Risk

IPSE’s survey found that most sole traders are still managing their finances in ways that will not meet MTD requirements. To be compliant, digital records are mandatory. Currently:

• A third continue to use pen and paper for their books.
• Two-thirds rely on spreadsheets.
• More than half track income through bank statements.

A "Serious Communication Gap" from HMRC

With less than four months until the first deadline, IPSE warns that the government's message isn't reaching those who need it most. IPSE stated:

"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 so little time left until the first deadline, our findings highlight a serious communication gap. Most respondents reported receiving no direct information from HMRC, which explains why awareness remains so low."

How to Prepare for MTD for Income Tax

With the April deadline fast approaching, you don’t need to wait for HMRC to contact you. Here is how you can get your business ready now:

Step 1: Check your income. Review your total business and property income for the last tax year. If it’s over £50,000, you must be compliant by April 2026.

Step 2: Ditch the paper and pens. If you are still using manual ledgers, start transitioning to a digital format today. Even moving to a basic spreadsheet is a good first step toward digital record-keeping.

Step 3: Choose "Compatible Software." MTD requires you to use HMRC-approved software to submit your updates. Look for popular options like Xero, QuickBooks, or FreeAgent, or check the GOV.UK list of compatible software.

Step 4: Set up a dedicated business bank account. To make digital tracking easier, ensure your business transactions are separate from your personal spending. This makes "tagging" income and expenses much faster.

Step 5: Speak to an accountant. If you feel overwhelmed, we can help you as an accountant. We will help you choose the right software. We will also make sure your first quarterly submission is accurate.