Seven in ten UK sole traders are still unprepared for the biggest change to the tax system in a generation, just three months before it comes into force, according to new research.
The findings, from Sage and IPSE, reveal widespread uncertainty ahead of the rollout of Making Tax Digital (MTD) for Income Tax in April. The reform will require millions of sole traders to move from annual self-assessment to quarterly digital reporting to HMRC.
The survey of 1,000 sole traders found that 70 per cent are not ready for the change. A third are still tracking income and expenses using pen and paper, while almost two thirds rely on spreadsheets to complete their tax returns — methods that will no longer be sufficient under the new rules.
In response, Sage has launched a £25,000 prize draw aimed at encouraging sole traders to prepare for the transition. One winner will receive £25,000 to help cover the cost of a future tax bill, as a growing number of self-employed workers face the prospect of increased administrative burdens and unfamiliar reporting requirements.
Lisa Ewens, senior vice president for small business at Sage, said many sole traders are underestimating the scale of the change.
“This is one of the biggest shifts sole traders have faced in decades, yet most are still not ready,” she said. “Leaving it late risks stress, mistakes and unexpected tax bills. The earlier people start, the easier this transition becomes.”
Under MTD for Income Tax, sole traders will be required to keep digital records and submit income and expense updates every three months, replacing the once-a-year self-assessment process. While the government has argued the system will improve accuracy and reduce errors, experts warn that poor preparation could result in compliance issues and added pressure on already stretched small businesses.
Alongside the prize draw, Sage is offering free MTD-ready accounting software to help sole traders begin keeping digital records and familiarise themselves with quarterly reporting before the April deadline.
Sole traders can enter the £25,000 competition by signing up to Sage’s free MTD-ready software, with entries closing on 31 January.
