With only six months until the first Making Tax Digital (MTD) deadline for sole traders, new research has revealed that 70% still aren’t aware the change is coming.
From April 2026, the first phase of MTD for income tax will apply to sole traders earning over £50,000. It means they must submit quarterly digital tax updates to HMRC.
But according to the report by Sage and IPSE, only 30% have “true awareness”of MTD, and 39% of those have taken no steps to prepare.
Most still rely on manual methods, the study found, with 66% using spreadsheets, 56% relying on bank statements and 33% tracking income and expenses with pen and paper.
Despite the change requiring sole traders and landlords to use software to send their updates, only 10% currently use cloud-based accounting software.
Lisa Ewens, senior vice president for small business at Sage, said:
“Making Tax Digital is a pivotal moment for the millions of sole traders who power the UK economy, yet our research shows awareness remains low. These entrepreneurs already juggle every part of their business, so new requirements can feel overwhelming — but MTD doesn’t need to be another burden.
“Handled well, it gives sole traders clearer financial visibility, fewer tax-time surprises and more time back for the work that matters. That’s why software providers and business networks must help raise readiness.”
Vicks Rodwell, managing director at IPSE:
“Less than six months out, too many sole traders don’t understand what these changes will mean.
Making Tax Digital will be transformative for self-assessment taxpayers, but hundreds of thousands of business owners may only find out when they go to file their next return, by which time it may be too late to prepare. We are calling on the government to ramp up its Making Tax Digital campaign. HMRC’s outreach simply hasn’t registered with taxpayers.”
To support sole traders in the transition, the report called for:
1. HMRC to maximise their awareness campaign for sole traders.
2. Software providers to make digital tools simpler and more affordable.
3. Business networks and accountants to deliver sector-specific guidance and training.