More than one in five sole traders and landlords warn new digital tax rules could hurt their business as major HMRC deadline looms.
Thousands of sole traders and landlords are bracing for a major tax overhaul – and many fear it could make running their business even harder.
New research has revealed that more than one in five (22%) people affected by HMRC’s controversial Making Tax Digital (MTD) for Income Tax scheme believe the changes will have a negative impact on their day-to-day operations.
The findings come as the first mandatory quarterly tax reporting deadline approaches, with sole traders and landlords earning more than £50,000 set to submit their first digital update to HMRC on August 7.
The concern appears even greater among those due to join the scheme in the coming years, with almost a quarter (24%) expecting the changes to affect their business negatively.
Under the new rules, the traditional annual Self Assessment tax return will be replaced by a fully digital system. Sole traders and landlords will be required to use HMRC-approved software to submit quarterly updates on their income and expenses.
The changes will be rolled out in stages, with those earning more than £30,000 joining from April 2027, followed by those earning more than £20,000 from April 2028.
A survey by accounting software provider FreeAgent found many business owners remain uncertain about what the reforms will mean in practice.
Jon Martingale, Head of Product Management and MTD Expert at FreeAgent, said: “These findings show there’s still a real level of uncertainty and concern among sole traders and landlords about what the changes mean in practice.
“For many people, the move to quarterly reporting represents a major shift in the way they manage their finance and tax obligations, so it’s understandable that some are worried about the potential impact on their day-to-day operations.”
The research suggests many are yet to be convinced by the new system. Just 11% of those still waiting to sign up believe MTD will have a positive impact on their business.
However, attitudes appear to improve once businesses begin using the scheme. Nearly one in five (19%) of those already signed up say it has had a positive effect, while almost three in ten (29%) believe the benefits will become clearer over time.
Martingale added: “While there’s still some hesitation around Making Tax Digital, it’s encouraging to see that businesses already using the system are feeling more positive about the changes over time.
“It suggests that once sole traders and landlords become familiar with the new way of reporting, many are finding the process easier to manage than they initially expected.”
With the first wave of mandatory submissions now underway, experts are urging affected taxpayers to prepare early and ensure they have compliant software in place before the next key HMRC deadline arrives.
