A significant majority of the UK's sole traders are not ready for what is being termed the most substantial reform to the tax system in a generation, according to new research.
The Impending MTD Deadline
Starting on 6 April 2026, a major shift in how self-employed individuals manage their tax affairs will come into force. Sole traders with an annual gross income exceeding £50,000 will be mandated to join HM Revenue & Customs' (HMRC) Making Tax Digital (MTD) for Income Tax initiative. This requires the use of approved digital software to record and submit income and expenses quarterly.
Widespread Lack of Preparedness
Despite the fast-approaching deadline, a study from software giant Sage has uncovered a stark readiness gap. It found that only 30 per cent of those affected are prepared, meaning a concerning 70 per cent remain unprepared for the digital transition.
The research highlights that outdated methods are still prevalent. Two-thirds of small businesses and sole traders continue to rely on manual or traditional techniques for their tax returns. Perhaps more surprisingly, one in three still uses pen and paper to track their sales and expenses.
Voices from the Frontline
TV presenter and carpenter Mark Millar, known for Channel 5's 'Dream Kitchens and Bathrooms', echoed these findings from his own experience. "Many sole traders I know are still using their pencils and scraps of paper to keep tabs on their profit and loss," he said.
Reflecting on starting his construction company in 2003, Millar recalled the immense pressure of manual accounting. "I can remember the pressure I felt under when I was quoting, invoicing and managing clients, all while trying to keep on top of my tax returns and stay compliant," he explained. He views MTD as a chance for business owners to reclaim time spent on administration.
Lisa Ewens, Senior Vice President for Small Business at Sage, emphasised the challenge for time-poor entrepreneurs. "Sole traders are often expected to be a Jack of all trades... so any extra administrative pressure can feel overwhelming," she stated.
However, Ewens framed the change positively, noting it offers "clearer financial visibility, fewer surprises at tax time, and more time back to spend on the work that really matters."
The message from experts is clear: with the April 2026 deadline fixed, sole traders falling within the scope must begin their digital transition now to avoid last-minute panic and ensure a smooth compliance journey with HMRC's landmark digital tax system.
