Self-Employed Brits Face Knowledge Gap as Major Tax Change Deadline Approaches
A concerning new study has revealed that almost half of self-employed Britons remain unprepared for the upcoming Making Tax Digital (MTD) overhaul, with the first implementation phase just over a year away.
The research, conducted by Censuswide among 500 self-employed respondents, found that 42% don't understand what will be required of them under the new system. Furthermore, 37% are unclear about the income thresholds that determine when they must comply.
What Is Making Tax Digital?
Making Tax Digital represents a fundamental shift in how sole traders and landlords report their income and expenses to HM Revenue and Customs (HMRC). This government initiative aims to modernize the UK tax system by requiring digital record-keeping and quarterly submissions through compatible software.
The system replaces traditional manual, annual, or paper-based reporting with a digital, real-time process. While MTD for VAT is already mandatory, MTD for Income Tax (MTD for ITSA) will roll out in two phases starting from April 2026.
Implementation Timeline and Requirements
The phased implementation will affect different income groups at different times:
- April 2026: Self-employed individuals and landlords with qualifying income over £50,000 must comply
- April 2027: Those with qualifying income over £30,000 must comply
Despite these clear deadlines, the research uncovered significant gaps in preparation. More than a third (35%) of self-employed respondents currently lack HMRC-compliant accounting or bridging software and have no plans to acquire it, despite this being a core requirement for MTD compliance.
Expert Warning About Preparation
Mike Parkes, technical director at Coconut (record-keeping software approved for Making Tax Digital), which commissioned the research, emphasized the urgency of preparation. "With quarterly reporting becoming the norm and each Making Tax Digital deadline coming round quicker than you think, now's the time to get your business set up properly," he stated.
Parkes explained the fundamental requirements: "At its core, MTD is HMRC's push to move tax reporting fully online. If you're still juggling spreadsheets, paper receipts and invoices, this is the moment to change that. MTD requires digital income and expense records, a clear audit trail and software that links directly to HMRC."
He offered reassurance to those feeling overwhelmed: "MTD isn't going anywhere, but that doesn't mean it has to take over your life. With the right setup, clear processes and a bit of forward planning, quarterly reporting becomes just another small task, not a looming threat."
The findings highlight a significant knowledge gap among the self-employed community as the UK moves toward a fully digital tax system. With the first deadline falling on April 6, 2026, experts urge affected individuals to begin their preparations immediately to avoid potential compliance issues.
