Lloyds Bank has issued a warning that 55% of small businesses are not prepared for a new digital tax deadline from HMRC on August 7. The bank, which operates branches in Birmingham, highlighted that with only weeks remaining until the first Making Tax Digital (MTD) for Income Tax submission deadline, over half of sole traders and landlords still have work to do to comply.
Research Reveals Widespread Unpreparedness
Based on HMRC estimates of the number of sole traders and landlords in scope, approximately 475,000 small businesses may not have completed preparations for the first phase of MTD. The new rules apply to sole traders with annual revenue of £50,000 or more, with thresholds reducing to £30,000 and then £20,000 over the next two years.
Benefits of Digital Tax Management
Despite the lack of readiness, the research found that 40% of businesses said the move to digital tax management had helped them become more organised, and 28% said it reduced last-minute tax stress. Additionally, 93% of respondents indicated that it would be useful to manage tax records, deadlines, and administration through their banking app or online banking, demonstrating demand for simpler compliance methods.
Lloyds Bank's Response
Ramki Sankaranarayan, Head of Business Banking at Lloyds, commented: "Making Tax Digital represents one of the biggest administrative changes many sole traders will have experienced for years. Our research suggests that while businesses recognise the benefits of digital record keeping, many are still working through what they need to do before the first submission deadline. With small business owners already balancing multiple demands on their time, simplicity matters. That's why we've built HMRC-recognised Making Tax Digital for income tax functionality directly into eligible Lloyds Business Accounts at no extra cost, helping customers manage tax administration alongside their everyday banking."
Impact on Small Businesses
The warning underscores the urgency for sole traders and landlords to prepare for the digital tax system. Failure to comply could result in penalties, adding financial strain to businesses already managing multiple responsibilities. Lloyds' integration of MTD features aims to ease the transition, but the research indicates a significant gap in readiness that needs to be addressed before the August 7 deadline.
