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Looking for comments around whether Making Tax Digital admin burden could cause people to cut self employed work or go more cash-based

Journalist: Laura Purkess, Freelance

ended 28. May 2026

Hiya, I'm looking for any views on whether Making Tax Digital and the extra admin burden for sole traders who don't use a business account could cause them to cut their work to keep below the £50k threshold, or could cause more people to go cash-based / ‘fudge’ it to avoid having to file quarterly. On the back of conversations with some anonymised sole traders who say they don't understand it and would rather avoid it. For a feature in The i Paper. Also looking for thoughts on - 

-is there any actual benefit to taxpayers of this, or is it all benefitting the government? 

-why did the government not make its own MTD software and asks sole traders to use a commercial version? Has this fostered any positive commercial competition?

-is there any risk that the increased complexity could discourage people from going self-employed / taking on profitable side hustles?

 

 

7 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
MTD is yet another stealth business tax for no real gain/reason. As with everything, the complyers will comply and the ones that find a loophole will. Cash is becoming more popular. The only thing the self employed need to be mindful of is that their actions have a consequence particularly when it comes to mortgages and borrowing as lenders will only take into account the figures reported and provable to HMRC.
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Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
MTD risks becoming a classic example of policy designed for compliance, not behaviour. On paper, quarterly digital reporting may improve record keeping and reduce errors. In real life, many sole traders are already time-poor, under-supported and not running their finances through neat business accounts.

Yes, some may deliberately stay under the threshold, turn down work or avoid growth because the admin feels bigger than the reward. That is bad for enterprise. Others may be tempted to rely more on cash, which is exactly the opposite of what the system is trying to achieve.

There can be benefits if it forces better bookkeeping and fewer year-end tax shocks, but the rollout has to feel usable, not punitive. If HMRC wants digital compliance, it should make the default journey simple, low-cost and confidence-building.

The danger is that profitable side hustles and self-employment start to look less attractive, not because people fear tax, but because they fear complexity.
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Tony Redondo
Founder at Cosmos Currency Exchange
For decades, the self-employed were championed as the backbone of the British economy—taking risks, creating jobs, and driving growth. Today, they feel like the state's most targeted demographic. Facing a flat economy, historic tax burdens, and now the relentless bureaucratic wheel of quarterly digital reporting, many sole traders are making a pragmatic choice: closing their ledgers, surrendering their autonomy for the safety of a PAYE job, or taking their talents to countries that actually want them.
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Kate Underwood
Founder & Chief People Strategist at Kate Underwood HR and Training
Making Tax Digital feels like HMRC solving its own problem and dressing it up as progress for the rest of us. Sole traders aren't avoiding quarterly filing because they're lazy. They're avoiding it because nobody actually asked them if four tax returns a year was the upgrade they wanted.
The risk of people quietly cutting their hours to stay under £50k is very real. So is the slow drift back to cash work. Once admin starts eating an evening a week, the sums stop adding up.
You don't fix tax compliance by making compliance harder.
It's also a bit odd that the government didn't build its own software, then turned around and told sole traders to go pick a paid one. Yes, it's created a market, but for a lot of small operators it just feels like another bill landing on the doormat.
The real worry is what this does to side hustles, which is where so many small businesses actually start.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
MTD will produce no benefits for UK tax payers. The self employed already have to pre-pay tax on income not even earned yet, have to make returns and pay in full. Making it quarterly returns increases cost, hassle and admin but will not do anything to improve accuracy or amount of tax collected. The £50k threshold will see many sole traders mysteriously earning just under this amount year on year. It would be far more impactful if HMRC spent more time tackling non-payers and closing loopholes that allow many large companies pay disproportionate tax on their UK income.
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Debbie Porter
Managing Director at Destination Digital Marketing
Why would government want to cut the legs from under the small business economy in this way?

The gateway to becoming a micro or small business is having been a sole trader in the first place. The gateway to becoming a big business is to have been a small business previously. The natural order, when you are looking at growth, is that every idea has to start somewhere.

Making Tax Digital will require sole traders earning over £50,000 to make quarterly returns. Next year the threshold is £30,000 and the year after that the threshold is £20,000. The administrative load of making quarterly returns when you’re earning £20,000 (minimum wage is a salary of £24,700 per annum) will be too much for many people to bear.

Entrepreneurial spirit will be knocked on the head before it’s even got going under these conditions. And we’ll all end up having to take jobs at Starbucks, Amazon, Apple and Google, where little to no Corporation Tax is taken from profits under legal global royalty shifting.

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Colette Mason
AI Ethics Consultant at Clever Clogs AI
The PAC has documented a thirty-year record of government IT delivery failure. Handing HMRC a software development project would be throwing good money after bad. A smarter move would be subsidising subscriptions to approved commercial platforms so compliance doesn't come with a bill sole traders didn't ask for.

HMRC says MTD reduces the tax gap, currently £47bn a year, and quarterly data should catch errors earlier. But the scrutiny this creates for a sole trader declaring £52k has no structural equivalent for large companies running complex jurisdictional arrangements worth millions. The enforcement intensity is pointed firmly down the food chain.

This data could feed HMRC's Connect system, which processes 55bn data points and now uses AI to scrape social media for lifestyle mismatches against declared income. Quarterly filings give that machine a continuous feed rather than an annual snapshot, I doubt that level of visibility was designed with the solopreneur's interests in mind.