HMRC rules are changing from April 6 next year
Just 30 per cent of people who will be hit by the change are prepared for what has been described as ‘the biggest tax reform in a generation’. From April 6, 2026, sole traders in the UK with an annual gross income over £50,000 will be required to comply with HMRC’s Making Tax Digital (MTD) initiative for Income Tax.
New research from Sage found two thirds of small business and sole traders are still using manual or traditional methods to prepare their tax returns and one in three are still using pen and paper to track sales and expenses.
TV presenter and carpenter Mark Millar, who presents shows including Channel 5’s primetime series Dream Kitchens and Bathrooms with Mark Millar, said digital tax has eased the pressures he faces as a hands-on tradesman.
He said: “Many sole traders I know are still using their pencils and scraps of paper to keep tabs on their profit and loss. Then when it comes to filing their taxes, many are scrabbling around trying to find them all. That used to be me. I started my own construction company in 2003, and back then all my accounting was done manually, so I understand all too well how much time it can take.
“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. Many small business owners feel weighed down by the admin they must do and so Making Tax Digital is an opportunity for them to make this less time-consuming.
“In the years to come, I can imagine many people will look back and not be able to believe they did their tax return manually, using a pen and paper.”
The incoming mandate will digitise the tax system for Income Tax Self-Assessment. Sage research shows that among those aware of the April mandate almost four in 10 said they had not done anything to prepare for the shift.
Senior Vice President for Small Business, Lisa Ewens, at Sage, said: “Sole traders are often expected to be a Jack of all trades – handling everything from finances to customer work – so any extra administrative pressure can feel overwhelming.
“With Making Tax Digital for Income Tax approaching, sole traders have an opportunity to turn what might feel like another obligation into something genuinely useful: clearer financial visibility, fewer surprises at tax time, and more time back to spend on the work that really matters.”
