Are you prepared for Making Tax Digital?

Survey finds Warwickshire business leaders are feeling the pain of making tax digital 

By Prime Accountants

Less than half of Warwickshire business leaders are fully prepared for Making Tax Digital, according to a survey by Prime Accountants. 

A poll of Coventry and Warwickshire Chamber of Commerce members has revealed that only 47 per cent are fully prepared for HMRC’s Making Tax Digital, while 49 per cent describe themselves as ‘somewhat prepared’ or ‘unprepared’. 

Coventry and Warwickshire business leaders were quizzed by the West Midlands accounting specialists on their transition to Making Tax Digital as part of the Chamber of Commerce’s Quarterly Economic Survey. 

 

Pie chart on preparation for Making Tax Digital

 

Making Tax Digital for VAT and Income Tax

HMRC is digitising tax administration and management to reduce the tax gap – the difference between what should be paid and the amount that is actually paid – by bringing tax payments forward.   

Making Tax Digital is already compulsory for VAT registered businesses and will become mandatory for Income Tax Self Assessment from April 2026. 

This will impact sole trader businesses and landlords whose income totals over £50,000. 

Read our FAQs on Making Tax Digital to learn more. 

 

Businesses are turning to third party support

Only 14 per cent of business leaders surveyed predict that becoming Making Tax Digital compliant will create no additional costs for them and their business.  

Meanwhile, 44 per cent are investing in third party support, such as advice from an accountant, to ensure compliance, while 19 per cent are providing additional training for staff and 18 per cent are investing in new software. 

Seven per cent plan to appoint new staff to support their ongoing transition to Making Tax Digital. 

The cost of Making Tax Digital 

Of those investing to comply, the majority – 14 per cent – estimate spending between £300 and £500, eight per cent will spend £100 to £300, and just four per cent will spend less than £100. 

At the other end of the scale, 5.5 per cent predict costs of £500 to £700, another 5.5 per cent estimate costs of £700 to £1,000, and seven per cent are bracing for costs totalling more than £1,000.

Cost of Making Tax Digital bar chart

Bar chart showing investments in order to comply with Making Tax Digital

Increased time and costs 

Steve Harcourt, director at Prime Accountants and president of the Coventry and Warwickshire Chamber of Commerce, said: “It’s unsurprising that business leaders are feeling so unprepared at this stage, as HMRC has continually moved the Making Tax Digital deadline. 

“Ultimately, individuals won’t want to prioritise something that keeps moving back however, it is important to prepare from an administration and cash flow point of view. 

“Those affected by Making Tax Digital will face more filing and administration throughout the year, with quarterly filing, an end of period statement and a final declaration that summarises all income for a tax year.

“This will inevitably increase the time and cost involved in submitting tax returns for sole traders and small businesses in the region, and place increased pressure on cash flow.” 

Limited take up for Making Tax Digital for Income Tax 

While individuals have been able to voluntarily sign up for Making Tax Digital for Income Tax since April 2024, data obtained from HMRC by Prime Accountants via a Freedom of Information request reveals that just 35 individuals have so far registered for the scheme in the UK. 

More than 12 million people were required to submit an Income Tax Self Assessment return for the tax year 2022/23. 

Concerns about MTD 

Steve added: “It is surprising that so few are registering voluntarily, but there has also been very little communication from HMRC to those affected by the changes in digitisation. 

“Individuals will have to adopt software capable of submitting Making Tax Digital returns and ensure they are completed every quarter.  

“It underlines that the responsibility and admin burden is very much on the individual, so it is important we raise awareness and ensure the local business community is not caught out by this, particularly those in business partnerships who may not realise they are affected.” 

Morgan Davies, director at Prime Accountants Group

Are you prepared for Making Tax Digital?

Learn more about Making Tax Digital or talk to our personal tax planning advisors for support with Making Tax Digital for Income Tax.