Tens of thousands of sole traders aren’t ready for this tax change in April 2026

Making Tax Digital (MTD) for Income Tax is coming in April 2026, and it represents a major shift for sole traders and landlords. However, new research from IPSE and Sage shows that awareness of this change is worryingly low.

Our survey of 1,000 sole traders found that only 30% have a clear understanding of what MTD involves. In practical terms, that means seven out of ten either haven’t heard of the initiative or don’t realise it requires digital record-keeping and quarterly submissions through approved software.

Despite the looming deadlines, most sole traders are still managing their finances in ways that won’t meet MTD requirements. A third continue to use pen and paper for their books, two-thirds rely on spreadsheets, and more than half track income through bank statements. 

Notably, just one in ten have adopted cloud-based accounting software.

We’re concerned that this could mean thousands of sole traders only discover the change when they come to complete their next tax return – far too late to avoid any disruption.

The timeline for compliance is based on your income:

• From April 2026: Sole traders and landlords earning over £50,000 must keep digital records and submit quarterly updates through compatible software
• From April 2027: Sole traders and landlords earning over £30,000

• From April 2028: Sole traders and landlords earning over £20,000

   

For a more comprehensive overview of what exactly will be required and when, we’ve recently updated our MTD guide.

Given the fact that we’ve already had previous delays and considerable resources and time have been invested, HMRC will not be pausing this rollout anytime soon.

However, HMRC has a duty to inform as many sole traders as possible – and right now, that awareness campaign is simply not landing.

With less than six months until the first deadline, our findings highlight a serious communication gap. Most respondents reported receiving no direct information from HMRC about MTD, which explains why awareness remains so low.

That’s why we’re calling on HMRC to take urgent action to ensure every sole trader understands what MTD means and what they need to do. If this doesn’t happen, thousands of sole traders could be left rushing to comply at the last minute, adding pressure during an already challenging period for our smallest businesses.

IPSE is working closely with HMRC and other experts to ensure the practical realities of MTD are considered by government. These discussions have led to a soft landing for the first year, where penalties will be waived. However, we believe this should go further. IPSE is calling on HMRC to extend this approach to those earning £30,000 and £20,000 when their deadlines arrive, so no one is penalised simply because they weren’t adequately informed or supported.

To help our members and the wider self-employed community prepare, IPSE will be hosting a series of webinars in the new year explaining what these changes mean in practice. We also plan to invite HMRC to join one of these sessions to answer your key questions about MTD. Stay tuned for details in the new year.