Many sole traders and landlords are still working out how to comply with Making Tax Digital without taking on more admin than necessary, now that the rules have gone live. That is not surprising. So far, relatively few people have registered. Many are still trying to understand what they need to do, how to keep the process manageable, and whether a low-cost or free software option could work.
A slow start for Making Tax Digital
At the start of April, a large proportion of those expected to register had still not signed up. The reason is often simple. Many do not see much benefit in keeping digital records and sending updates to HMRC every quarter.
Some already find it difficult to pull everything together once a year for self-assessment. Extra deadlines are unlikely to feel appealing.
The rules also create a wider concern. HMRC bases the MTD threshold on income, not profit or the amount of tax due. As a result, some people may have to comply even when profits are low or little tax is payable. That makes the added burden feel hard to justify.
Keeping things as simple as possible
For many sole traders and landlords, the simplest option may be to keep the required records in a spreadsheet and use bridging software to submit updates to HMRC. This may be a practical way to stay compliant while keeping costs down.
Anyone still wondering how to comply with Making Tax Digital should focus on choosing a system that is manageable in practice. With the first quarterly deadline approaching, now is the time to get organised. Leaving it too late may make the transition feel harder than it needs to be.
Choosing software
HMRC provides a software finder tool to help taxpayers compare products that work with Making Tax Digital, including some free options. This can be a useful starting point. Even so, it is still worth checking carefully whether a product is suitable before relying on it.
Software that connects directly to a bank account may suit many sole traders and landlords because it can reduce manual input and make record-keeping easier. However, it will not be right for everyone. It may be less useful where business or rental transactions still run through a personal bank account rather than a separate one.
Can you opt out?
Some people whose income has since dropped below the relevant threshold may assume they can leave the regime. In practice, that is only possible in limited circumstances.
HMRC’s position is that opting out is generally only available where all sources of qualifying income have stopped. For example, someone who stops being self-employed but still receives rental income would not usually be able to leave MTD.
Where opting out is available, taxpayers can normally do this through HMRC’s webchat service, by phone, or in writing.
Getting ready now matters
For those affected, the key issue is not just registering. It is putting a workable process in place before the first quarterly deadline arrives. This may mean moving away from once-a-year record-keeping. It could also mean reviewing whether a spreadsheet will be enough or deciding whether free or low-cost software could do the job.
The right solution will depend on the individual. In most cases, though, getting organised early will make the move to Making Tax Digital easier to manage. For sole traders and landlords still working out how to comply with Making Tax Digital, the best starting point is to choose a system that feels simple, practical, and sustainable.
A software comparison tool from HMRC can be a useful place to begin when reviewing the options.