04/03/2026
HMRC - Making Tax Digital: An Unfair Burden on Scotland's Self-Employed"
At a time when Scotland’s small businesses are navigating rising costs, slower growth, and ongoing economic uncertainty, imposing additional administrative burdens on the self-employed risks doing more harm than good.
The rollout of Making Tax Digital (MTD) will require sole traders and landlords earning over £50,000 to submit quarterly updates to HMRC — five submissions a year instead of one annual tax return — using paid, HMRC-approved software. Over the next few years, the threshold will fall to £20,000 in turnover, bringing many more Scots into scope.
In Scotland, where microbusinesses make up the overwhelming majority of enterprises — from tradespeople in Lanarkshire to rural landlords in Argyll, freelance creatives in Glasgow, and agricultural contractors in Aberdeenshire — the impact could be significant. Many operate on modest margins, often with seasonal or unpredictable income. For them, this is not simply a digital upgrade; it is an additional cost in both money and time.
The awareness gap is also troubling. Surveys suggest around 70% of sole traders are either unaware of MTD or unclear on what it requires. With a new points-based penalty system and £200 fines attached to missed submissions, the risk of accidental non-compliance is high — particularly among older or less tech-confident business owners.
Crucially, many who will eventually fall within the idiotic £20,000 turnover threshold may generate profits below the personal allowance and owe little or no income tax. Requiring five digital submissions annually in such cases raises legitimate questions about proportionality and fairness.
The decision to scrap Making Tax Digital for Corporation Tax acknowledges that a one-size-fits-all approach does not suit a diverse business landscape. The same principle should apply to sole traders. Scotland’s economy relies heavily on small, independent operators — particularly in rural and island communities where administrative capacity is limited and broadband connectivity can still be inconsistent.
If the aim is to reduce errors and narrow the tax gap, reform must be designed in partnership with those it affects. Without adequate support, accessible free software, and realistic thresholds, Making Tax Digital risks being seen not as modernisation, but as another hurdle for Scotland’s self-employed sector.
Tax reform should support enterprise — not stifle it.
