Many Warks businesses unprepared for digitalised taxes, survey reveals

Less than half of Warwickshire business leaders are fully prepared for HMRC’s new Making Tax Digital initiative, according to a recent survey.

A poll of Coventry and Warwickshire Chamber of Commerce members by Prime Accountants revealed that only 47 per cent are fully prepared for digitalised taxes, while 49 per cent describe themselves as ‘somewhat prepared’ or ‘unprepared’.

HMRC is digitalising 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 by sole traders and landlords from April 2026.

Only 14 per cent of business leaders surveyed predict that complying with the new regulations will create no additional costs for them and their businesses.

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.

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’s quarterly economic survey.

Steve Harcourt, director at Prime Accountants and president of 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’s important to prepare from an administration and cashflow 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 cashflow.”

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 shows 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.

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

“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’s 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’re affected.”