HMRC - Income Tax Self-Assessment: Readiness for Making Tax Digital

What is this survey about? 

HMRC commissioned Ipsos to undertake this research to explore the preparedness of Income Tax Self-Assessment (ITSA) customers, in the lead up to Making Tax Digital (MTD) mandation in April 2024. This population is comprised of unincorporated small businesses, self-employed people, and landlords with income over £10,000. The primary aims were to understand:

-    current record keeping practices in meeting ITSA obligations
-    current attitudes towards engagement with MTD
-    ability to comply and support needs in transitioning to MTD

Methodology - This was a mixed method research project using both qualitative and quantitative research approaches including:

• The customers involved in this research were segmented into 6 distinct groups based on their support needs, formed from responses to 2,200 phone surveys. Fieldwork took place between February and August 2021.
• 30 in-depth interviews with customers who will be making the change to Making Tax Digital for ITSA in 2024. The interviews took place between 26 October and 12 November 2021.

Key findings 

• There is substantial variation in both in terms of ITSA customers ability to comply, and how receptive they are to the changes. Overall, the research demonstrated the importance of trial periods for ITSA customers to understand and feel confident with the new system.
• Two in five customers felt that using MTD-compatible software (38%) and submitting quarterly summaries (39%) would be easy. However, similar proportions expected to find using compatible software (35%) and submitting quarterly summaries (39%) difficult
• Nevertheless, the findings do indicate that the proportion of ITSA customers that feel the transition will be easy has risen over time. 
• Low awareness and understanding of what the changes will be like in practice affected customers’ responses during both the survey and qualitative research. 
• The MTD for ITSA population is fairly fragmented, consisting of 6 customer groups with varying levels of capability, current recordkeeping practices, and likely engagement with MTD

Technical note: 

• A telephone survey, based on a random probability sampling design, was undertaken with 2,200 ITSA customers between 22 February and 20 August 2021. The final data was weighted to be representative of the MTD for ITSA population.  
• Follow-up depth interviews were conducted with 30 survey participants. The in-depth interviews were spread across the 6 Clusters, with greater focus being placed on those identified during the survey as needing more support, or being more resistant to MTD. The interviews took place between 26 October and 12 November 2021.