One in Five Fear Making Tax Digital Could Hurt Their Business. Should You Be Concerned?
Making Tax Digital remains one of the most significant changes to the UK tax system in recent years. While the aim is to modernise tax reporting and encourage better digital record-keeping, many business owners remain uncertain about what the changes mean for them.
A recent survey found that more than one in five sole traders and landlords already affected by Making Tax Digital believe the changes could harm their business.
With the first quarterly submission deadline approaching and further threshold changes planned over the coming years, it is easy to see why many businesses are closely watching.
What is Making Tax Digital?
Making Tax Digital (MTD) is HMRC’s programme to move tax reporting from annual submissions to more frequent digital reporting.
Under Making Tax Digital for Income Tax, affected sole traders and landlords must:
- Keep digital records
- Use HMRC-compatible software
- Submit quarterly updates to HMRC
- Complete an end-of-year declaration
The aim is to improve accuracy and give taxpayers a clearer view of their tax position throughout the year.
Why are some businesses concerned?
According to the survey, 22% of sole traders and landlords already affected by Making Tax Digital believe the reforms will harm their business.
For many, these concerns are understandable.
The shift from a single annual tax return to quarterly updates marks a significant change in how records are kept. Businesses that have traditionally updated their bookkeeping once or twice a year may now need to adopt entirely new processes.
Common concerns include:
- More frequent reporting requirements
- Learning new software
- Additional administration
- Keeping records updated throughout the year
- Fear of making mistakes
For smaller businesses, these changes can initially feel like yet another task on an already busy workload.
The reality may be less daunting than expected
Interestingly, the same survey found that attitudes towards Making Tax Digital appear to improve once businesses start using the system.
Among respondents already using MTD, 19% viewed the reforms positively, while 29% felt the benefits would become clearer in time.
This suggests that much of the concern may stem from uncertainty rather than from experience.
Many businesses find that once software is set up and processes are in place, keeping records up to date becomes part of their normal routine.
The next deadlines are approaching
The first quarterly reporting period under Making Tax Digital runs from 6 April to 5 July 2026.
The first submission deadline is 7 August 2026.
Currently, the rules apply to sole traders and landlords with qualifying income exceeding £50,000.
However, the threshold will be reduced to £30,000 from April 2027 and to £20,000 from April 2028, bringing many more businesses into scope.
Even if Making Tax Digital does not affect you today, it may affect you sooner than you expect.
Good bookkeeping makes the transition easier
One of the key factors in a successful transition to Making Tax Digital is the quality of your bookkeeping.
Businesses that already:
- Keep records up to date
- Use digital systems
- Reconcile bank accounts regularly
- Store receipts and invoices electronically
Are often better prepared for the changes.
The challenge is usually not the submission itself. It has accurate information available when it is needed.
How Rosemary Bookkeeping Can Help
MTD does represent a change in how businesses manage their finances, but it need not be difficult.
Whether you are already affected or preparing for future threshold changes, your local Rosemary Bookkeeper can help:
- Understand the rules
- Set up compatible software
- Maintain accurate records
- Prepare for quarterly reporting
- Stay compliant with HMRC requirements
The survey highlights that many businesses remain uncertain about Making Tax Digital. The best way to reduce that uncertainty is through preparation, good record-keeping, and the right support.
Find your nearest Rosemary Bookkeeper today.
This article was inspired by reporting on a Small Business Monitor Survey conducted by FreeAgent regarding attitudes towards Making Tax Digital. Only factual survey findings and published threshold information have been referenced.
