45% of sole traders would rather take a job than file quarterly
Making Tax Digital for Income Tax started on 6 April. Research by the tax platform Taxfix says nearly half of sole traders would return to employment rather than comply, and 23% have already begun incorporating.
Making Tax Digital for Income Tax went live on 6 April. It requires sole traders in scope to keep digital records and file updates through compatible software.
Research by Taxfix, the tax filing platform, found that 45% of sole traders would rather return to full-time employment than comply. The figure is the company's own, from its own survey.
On the same research, 23% have already started setting up a limited company. Limited companies are not subject to the sole trader rules.
Taxfix also reports that 57% of respondents are actively reconsidering their business structure, and that incorporation is proving more popular among younger workers.
The knock-on effect reaches the order book. Some 29% of businesses said they were hesitant about taking on new work because of the new requirements, according to the same figures.
The mechanics are the part worth diarising. MTD requires quarterly updates on income and expenses, with deadlines on 7 August, 7 November, 7 February and 7 May.
A final end-of-year declaration then confirms the tax position. That is five filing events a year where there was previously one.
There is some slack in the first year. HMRC is operating a points-based penalty system, so a single missed quarterly update does not automatically trigger a fine.
That leniency is a first-year arrangement, not a permanent one. Founders trading unincorporated should treat this year as the one to get the record-keeping working rather than the one to ignore.
The practical steps are unglamorous. Check on GOV.UK whether MTD applies to you, pick HMRC-approved software before the first deadline that affects you, and start recording income and expenses as they happen rather than reconstructing them in a panic each quarter.
The incorporation route is the one the survey suggests founders are taking, and it is the one that deserves the most caution. Changing legal structure to avoid a filing regime carries its own costs, filings and obligations, and this research does not measure whether the swap leaves anyone better off.
The honest read is that MTD converts an annual chore into a routine. Founders who already keep books monthly will notice little. Those who do their tax return in January with a shoebox will find the new calendar considerably less forgiving.