MTD Chaos Looms: Hundreds of Thousands of UK Sole Traders Unclear on New Requirements Ahead of Deadline

London, UK — With less than a week to go until Making Tax Digital (MTD) for Income Tax comes into force, new research from Europe’s leading AI tax accounting platform, Taxfix, reveals widespread confusion among the UK’s self-employed – including concerns that the changes could deter people from taking on more work or from remaining self-employed altogether.  

The research – which surveyed 1,000 sole traders who earnt over £50,000 for the 2024-2025 tax year – reveals that only two in five (39%) correctly identify that they will need to keep digital records from 6 April, while just one in three understand they must use HMRC-recognised software to do so. 

At the same time, misconceptions about how the system works are rife. 

More than a third (36%) mistakenly believe they will no longer need to file an annual tax return. Meanwhile, nearly a quarter (24%) think they will need to submit tax returns four times a year, and one in five (22%) believe MTD means they will need to pay more tax than before. 

Confusion adding to pressure on the self-employed 

These misconceptions and confusion are already influencing behaviour. 

More than a quarter (28%) say MTD will make them more cautious about taking on additional work, while a similar number (27%) expect to spend more time on tax administration, adding to the pressure they already feel and taking time away from running their business.  

For some, the changes could prove a tipping point. Nearly one in four (23%) say they are considering moving back into full-time employment as a result of Making Tax Digital. 

A nation unprepared 

The findings point to a major awareness gap just days before one of the biggest changes to the UK tax system in decades. 

Oliver Harcourt, Senior Director at Taxfix, said: “Hundreds of thousands of sole traders are heading into Making Tax Digital without a clear understanding of what’s required of them. That only 39% of people think the largest reform to the tax system in decades will help them feel more in control of their finances is a huge missed opportunity and communication failure from HMRC.  

Getting your taxes right shouldn’t feel like a second job, but that’s exactly what many sole traders are already feeling and MTD risks adding to that pressure. When self-employed workers are fearful of taking on additional work or even considering moving back into full-time employment just to escape the stress of a new filing system, something has gone very wrong.  

If MTD is to succeed, it needs to work not just for HMRC, but for the people expected to use it every day.” 

What Making Tax Digital actually means for sole traders 

Myth 1: Annual tax returns have been scrapped 

Reality: Sole traders will still need to submit a final declaration each year. MTD introduces quarterly updates, but these are in addition to, not a replacement for, the annual submission. 

Myth 2: Sole traders must now pay tax four times per year 

Reality: Quarterly updates are not full tax returns. They are simple summaries of income and expenses submitted digitally, designed to keep records up to date throughout the year. 

Myth 3: Under Making Tax Digital sole traders will have to pay more tax  

Reality: MTD doesn’t change how much tax you pay. It changes how you record and report your income, with the aim of improving accuracy and reducing errors. 

Myth 4: Sole traders can continue to manage their tax the same way as before as long as they submit quarterly updates 

Reality: From April, sole traders above the threshold will need to keep digital records and use HMRC-recognised software to submit updates. 

Supporting taxpayers through change  

To help ease the transition to Making Tax Digital, Taxfix is offering one month free of its new MTD subscription service, which combines easy-to-use, intuitive software with qualified accountant support, giving taxpayers the opportunity to get set up and confident with the new system ahead of key deadlines. 

By removing the need to navigate complex rules or software alone, Taxfix aims to reduce errors, save time, and take the stress out of tax – ensuring no one is left behind as the UK moves to a fully digital system. 

You can find more support here.  

ENDS 

About Taxfix 

Taxfix is Europe’s leading AI tax accounting platform, with over 8 million tax returns submitted and more than €4,5 billion in refunds reclaimed. We are transforming one of life’s most complex and stressful tasks – filing taxes – into a simple, secure, and personalised experience. With this, we empower people to take control of their finances and fix finance for all.   

With scalable technology, seamlessly integrated AI, and user-centric design, the platform offers a broad range of tailored tax filing solutions for its customers, from intuitive self-filing offers with guided Q&A flows, to expert tax advice as well as special financial services for the self-employed. For Taxfix’s independent tax accountant partners, the company has built a powerful partner platform that provides intelligent tools, automation, and AI-driven workflows to enable efficient and high-quality service delivery at scale.   

Taxfix employs over 400 professionals from more than 50 countries and is operating in three of the largest European financial markets: Germany, the UK and Spain. The company is backed by world-class investors such as Index Ventures, Valar Ventures, Creandum, Redalpine, and Teachers’ Venture Growth (OTPP).   

Methodology 

The research was conducted by Censuswide, among a sample of 1,000 sole traders in the UK who earned more than £50,000 in the tax year 2024-2025 and must keep digital records in order to comply with Making Tax Digital as off 6 April 2026.  

The data was collected between 24.03.26 – 27.03.26. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.