Making Tax Digital is driving 45% of sole traders to consider quitting

Going self-employed has never been an easy option, but new research by Taxfix has found almost half of UK entrepreneurs are currently considering throwing in the towel due to HMRC’s new Making Tax Digital (MTD) plan. 

In order to evade complex reporting requirements, the financial platform also revealed that 23% have already started setting up a limited company, as this business structure isn’t subject to the same rules as sole traders. 

The figures paint a stark reality for sole traders, who are already facing mounting financial pressures and red tape. But does complying with MTD have to be a headache big enough to quit your job over?

 45% of sole traders would rather quit than comply with MTD

As the government steams ahead with its Making Tax Digital plan, sole traders are voting with their feet, with Taxfix data finding that 45% would rather return to full-time employment than comply with the reporting requirements. 

MTD is part of a push HMRC is making to modernise the tax system. Having officially launched on April 6, the plan requires sole traders to keep digital records and submit regular updates through compatible software.

While it was designed to make tax reporting more efficient, many sole traders on the receiving end of the changes fear they will add an extra layer of complexity to an already time-consuming and bureaucratically heavy process.

Taxfix found that entrepreneurs are resorting to creative measures, with 57% of respondents actively considering their business structure to avoid extra complications. Almost a quarter have already taken the plunge by setting up limited companies – with this course of action proving particularly popular for younger workers. 

It’s not just workers who are meeting the government’s digitisation efforts with resistance, however. Almost three in 10 (29%) of businesses are cautious about taking on new work as a result of MTD – a sobering statistic in a climate where sole traders are already facing challenges securing consistent work. 

Despite the government’s intentions of creating a simpler, more efficient tax system, the message from the findings is clear: the mandatory Making Tax Digital push risks having the opposite effect, while potentially driving entrepreneurs away from self-employment altogether. 

But with the right guidance, are the mandatory MTD requirements really worth resigning for?

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How to comply with Making Tax Digital without the headache

While the prospect of adhering to MTD may feel overwhelming, the truth is that the transition doesn’t have to become a burden for sole traders. By getting organised in advance and using the right tools, staying compliant can become as much of a staple as your morning coffee.

Crucially, MTD requires sole traders to send quarterly updates about their income and expenses annually – with submission deadlines falling on August 7, November 7, February 7, and May 7 – alongside a final end-of-year declaration to confirm their tax position. 

To make the process as seamless as possible, we recommend using HMRC-approved Making Tax Digital software to help you manage your income and expenses throughout the year. In addition to making sure you’re MTD-ready, accounting software also has the upshot of streamlining bookkeeping and tracking cash flow, eliminating some of the hassle of 

There’s also some good news. HMRC is taking a lighter-touch approach during the first year of MTD for Income Tax, with a points-based penalty system meaning a single missed quarterly update won’t automatically result in a fine.