{"id":43294,"date":"2025-11-25T10:55:02","date_gmt":"2025-11-25T10:55:02","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/?post_type=knowledge&p=43294"},"modified":"2025-11-25T10:55:57","modified_gmt":"2025-11-25T10:55:57","slug":"how-much-will-making-tax-digital-cost","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/self-assessment\/how-much-will-making-tax-digital-cost\/","title":{"rendered":"72% of businesses expect MTD to increase their costs, study finds"},"content":{"rendered":"\n

Almost three quarters of small businesses and agents expect Making Tax Digital (MTD) to increase their costs, a recent survey reveals. <\/p>\n\n\n\n

The annual study from the Administrative Burdens Advisory Board (ABAB) highlights the concerns Self Assessment taxpayers have with the digitisation of the tax return process. <\/p>\n\n\n\n

Costs, time pressures, and a lack of awareness in general are the main issues highlighted in the report. <\/p>\n\n\n\n

How do small businesses feel about Making Tax Digital? <\/h2>\n\n\n\n

The survey found 72 per cent of respondents believe that the quarterly reporting element of MTD will significantly or slightly increase their costs. <\/p>\n\n\n\n

Meanwhile, 41 per cent think that keeping digital records will increase their costs significantly. <\/p>\n\n\n\n

On top of this, a large majority (69 per cent) don\u2019t expect to see any benefits to Making Tax Digital for income tax for their business or clients.  <\/p>\n\n\n\n

The legislative burden of tax related compliance is felt by many, with 57 per cent believing it had worsened in the last 12 months.\u00a0<\/p>\n\n\n\n

Awareness remains low <\/h3>\n\n\n\n

Fewer than half (46 per cent) of respondents said they were aware or very aware of MTD for income tax, which suggests the majority of taxpayers still don\u2019t know about the new process coming in April 2026.\u00a0<\/p>\n\n\n\n

Only half of those that answered the question on Making Tax Digital software are using compatible software, with the remaining half using spreadsheets, paper, or outsourcing to accountants<\/a>.\u00a0\u00a0<\/p>\n\n\n\n

The ABAB surveyed 3,146 small business owners and agents in July 2025 and published the full results<\/a> in October here.\u00a0<\/p>\n\n\n\n

How much could Making Tax Digital cost your business?\u00a0\u00a0<\/h2>\n\n\n\n

Making Tax Digital (MTD) could cost businesses on average up to \u00a3465 in the first year, according to HMRC estimates. But every business has different accounting needs which could have an impact on the cost of transitioning to MTD. <\/p>\n\n\n\n

In some cases, MTD-recognised accounting software is free while some options could cost up to \u00a3420 a year. But HMRC also claims cloud-based software could save business owners 20 to 39 hours annually on record keeping.<\/p>\n\n\n\n

Find out how much MTD will cost your business and what you need to do to prepare.\u00a0\u00a0<\/p>\n\n\n\n

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How much will Making Tax Digital cost?  <\/h2>\n\n\n\n

HMRC estimates<\/a> an average \u2018one-off\u2019 transitional cost of around \u00a3280 to \u00a3350 per business. Plus an additional average annual cost of \u00a3110 to \u00a3115 for day-to-day use. <\/p>\n\n\n\n

While the idea of quarterly reporting might feel daunting, the financial impact will vary depending on your business’s circumstances. <\/p>\n<\/div>\n\n\n\n

When does MTD start?<\/h3>\n\n\n\n

The shift to MTD for Self Assessment starts for sole traders and landlords from April 2026. But depending on your annual income, MTD will apply to your business from the following dates:<\/p>\n\n\n\n