With the first quarterly Making Tax Digital for Income Tax deadline now less than two weeks away, new research suggests that many sole traders and landlords are still unprepared for the new reporting system.
Research commissioned by business management platform Tide found that one in four qualifying business owners have not yet signed up for Making Tax Digital, despite falling within the first group required to comply from April 2026.
The findings are based on a survey of 500 sole traders and landlords earning more than £50,000 a year. Using HMRC’s estimate that around 864,000 taxpayers are affected in the first phase of the rollout, Tide estimates that approximately 216,000 people have yet to register.
Confusion remains over the new MTD rules
Perhaps the most striking finding is that 85% of respondents did not know how often they would need to submit information to HMRC once they joined Making Tax Digital.
Under the new system, qualifying taxpayers are expected to provide four quarterly updates during the tax year, followed by a final declaration after the year ends.
In practice, this means most affected sole traders and landlords will need to submit information to HMRC five times a year, rather than dealing with their tax affairs through a single annual Self Assessment return.
However, nearly one in three respondents incorrectly believed they would need to file eight or more times a year.
The research also found that 22% were unaware that the first quarterly deadline was approaching, despite the first group of taxpayers having entered the system from April.
For information on how the new system works, and who is affected, read our guide to Making Tax Digital for the self-employed.
Business owners expect MTD to take up six working days
The survey also looked at how much additional time business owners expect to spend dealing with the new rules.
On average, respondents predicted that Making Tax Digital would require six full working days over the next 12 months.
Based on the average daily revenue reported by those surveyed, Tide estimates that this could amount to around £1.5 billion in lost business revenue across qualifying sole traders and landlords during the first year of the scheme.
The calculation is based on respondents reporting average daily revenue of £296.31. Tide multiplied the resulting estimated annual time cost of £1,778 by the 864,000 people expected to join MTD in 2026.
This is Tide’s own estimate rather than an official HMRC calculation, but it gives some indication of the concerns many smaller businesses have about the extra administration involved.
Nearly half of respondents (44%) said they expected to deal with MTD administration during normal working hours. A further 32% said they believed they would have to complete the work during planned time off.
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Digital record keeping is now essential
One of the main practical changes under Making Tax Digital is the requirement to maintain digital accounting records and use compatible software to submit information to HMRC.
For sole traders already using cloud accounting software and recording transactions regularly, the move may be relatively manageable.
The transition may be more difficult for those still relying on paper records, manual spreadsheets or a once-a-year handover of receipts to an accountant.
Our guide to business accounting software for sole traders looks at the main features to consider when choosing a system.
We have also covered whether you still need an accountant if you use Xero or FreeAgent, as accounting software does not necessarily remove the need for professional advice.
The benefit of keeping records up to date throughout the year is that each quarterly update should involve less work. Businesses that leave bookkeeping until the deadline are more likely to face problems reconciling transactions and correcting missing information.
First quarterly deadline falls on 7 August
The first quarterly submission deadline is 7 August 2026 for sole traders and landlords who joined Making Tax Digital for Income Tax from the start of the 2026/27 tax year.
Anyone who has not yet registered, chosen compatible software or brought their records up to date now has little time left to prepare.
Our guide to Making Tax Digital deadlines sets out the key quarterly dates, while our article on how to register for Making Tax Digital covers the sign-up process.
It is also worth checking that the accounting software being used is recognised as compatible with HMRC’s system. Signing up for MTD does not, on its own, submit any figures.
Business owners must still maintain their records digitally and authorise the software to communicate with HMRC.
Tide also offers an HMRC-recognised Making Tax Digital tool through its business account. Further details are available on the Tide Making Tax Digital page.
What should affected sole traders do now?
With the deadline approaching, affected taxpayers should first check whether they are definitely within the first phase of the rollout.
The £50,000 threshold is based on qualifying income from self-employment and property, rather than profit after expenses.
Those who are required to comply should make sure they have registered with HMRC, selected compatible software and brought their digital records up to date.
It is also sensible to complete the first quarterly update before the final day, particularly if this is the first time you use the software to submit information to HMRC.
For many businesses, the first quarterly update is likely to be the biggest adjustment. Once they’re familiar with the process and keeping their records up to date, future submissions should take less time.
